MiCA

2.1 What key definitions are used in MiCA?

Crypto-asset
‘a digital representation of a value or of a right that is able to be transferred and stored electronically using distributed ledger technology or similar technology’

Asset-referenced token (ART)
‘a type of crypto-asset that is not an electronic money token and that purports to maintain a stable value by referencing another value or right or a combination thereof, including one or more official currencies’

E-money token (EMT)
‘a type of crypto-asset that purports to maintain a stable value by referencing the value of one official currency’

Issuer
‘a natural or legal person, or other undertaking, who issues crypto-assets’

Offer to the public
‘a communication to persons in any form, and by any means, presenting sufficient information on the terms of the offer and the crypto-assets to be offered so as to enable prospective holders to decide whether to purchase those crypto-assets’

Crypto-asset service provider
‘a legal person or other undertaking whose occupation or business is the provision of one or more crypto-asset services to clients on a professional basis, and that is allowed to provide crypto-asset services in accordance with Article 59’

Utility token
‘a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer’

2.2 Token categories

Within all tokens on the blockchain, three different categories can be identified. These are the well-known utility tokens, payment tokens and security tokens. How do these fit into the framework of MiCA?

Utility tokens are crypto-assets that give their holder access to or a right to use a platform, or its goods or services. These tokens are defined in MiCA, and are ideally covered by the regulation of crypto-assets that are not stable coins.

Payment tokens are, as the name suggests, tokens used to make payments. Because of the purpose of making payments, it is important that these tokens maintain a stable value. Therefore, these are the so-called stablecoins. These stablecoins are divided into two categories in MiCA, ART and EMT.

Security tokens are tokens that legally qualify as a security or financial instrument. These include shares, bonds or derivatives. This type of tokens qualifies as a financial instrument, and are therefore not regulated under MiCA.

If your company issues a token, it is important to know whether you fall under the regulations of MiCA. MiCA calls tokens that fall under its regulations ‘crypto-assets’ and makes two distinctions here: stablecoins, and crypto-assets that are not stablecoin. However, MiCA does not want to regulate crypto-assets that are already covered by existing regulations. Therefore, crypto-assets are exempted if they qualify as:

1. Financial instruments;
2. Electronic money, unless they also count as stablecoin;
3. Deposits;
4. Structural deposits;
5. Securitisations.

3.1 My company issues stablecoins

Stablecoins are tokens that are intended as a means of payment and seek to maintain a stable value. MiCA recognises two types of stablecoins and calls them ART and EMT. The difference between these is important. When your company issues ARTs, different obligations apply than when you issue EMTs. ARTs refer to several official currencies (fiat money like the Euro or Dollar), one or more commodities, or one or more crypto-assets, or a combination of these. EMTs refer to only a single official currency.

3.1.1 ART

If your company issues a stablecoin that qualifies as ART, you must obtain a license from the regulator. This license will then be valid throughout the EU. For this your company must be a legal entity established in the EU. This license is not required if:

• Over a 12-month period, the average amount of ART does not exceed €5.000.000; or
• The offer is exclusively addressed to qualified investors and the tokens may only be held by qualified investors.

Your company must also issue a white paper. This is the case both if you are required to have a license and if you are not required to have a license. This white paper must contain the following:

1. A description of governance arrangements;
2. A description of asset reserves;
3. A description of custodial arrangements;
4. A description of the investment policy if reserve assets are invested;
5. Information on the nature and enforceability of rights;
6. Mechanism to ensure liquidity of the crypto-assets;
7. A complaints procedure;
8. Main negative impacts on climate and other environmental negative impacts of the relevant consensus mechanism; and
9. Further information from Annex II of MiCA.

The issuance of these types of stable coins is also subject to equity capital requirements. This must be at least equal to the higher of the following two amounts;

• € 350.000; or
• 2% of the average amount of your reserve assets.

3.1.2 EMT

If your company issues a stable coin that qualifies as EMT, you must have a license as a credit institution or electronic money institution. These licenses are valid for the entire EU. This license is not required if:

• Total business activities generate an average outstanding electronic money not exceeding €5,000,000;
• None of the natural persons in charge of managing or operating the business has been convicted of offences related to money laundering or terrorist financing, or any other financial crime.

Your company must also issue a white paper. This is the case both if you are required to have a license and if you are not required to have a license. This white paper must contain the following:

1. A description of the publisher;
2. A description of the project and the main participants;
3. A statement whether the white paper concerns an offer of EMT or admission of EMT to trade on a crypto-asset trading platform;
4. A description of the rights and obligations attached to the tokens, including the right of redemption at nonimale value and the procedure and conditions for exercising those rights;
5. A complaints procedure;
6. Information about the underlying technology;
7. The risks associated with the project and the tokens;
8. Main negative impacts on climate and other environmental negative impacts of the relevant consensus mechanism; and
9. The information set out in Annex III.

3.1.3 Significante stable coins

When your token qualifies as a stable coin, it is also possible that it will qualify as significant. This is the case when you meet at least three of the following criteria:

1. The customer base threshold is not lower than ten million natural or legal persons;
2. The threshold for the value of the issued ART/EMT or, where appropriate, the market capitalization of that type of ART is not lower than 5 billion euros;
3. The threshold for the number and value of transactions in that ART/EMT shall not be less than 2.500.000 transactions a day or 500 million euros per day.

If your stablecoin qualifies as significant, additional requirements apply with respect to the following:

1. The remuneration policy;
2. The safekeeping;
3. Liquidity management; and
4. The governance arrangements.

3.2 My company issues crypto-assets that are not stable coins

If your company issues a crypto-asset that is not a stable coin, there is no license requirement. However, you must meet the following conditions:

1. Your company must be a legal entity;
2. Your company must draw up a white paper;
3. Your company must provide this white paper to the regulator;
4. Your company must publish a white paper;

The obligations under B, C and D do not apply in the following cases:

• The crypto-assets are unique and not fungible with other crypto-assets (NFT);
• The crypto-assets are offered to less than 150 individuals;
• The offer does not exceed € 1.000.000 or an equivalent over a 12-month period; or
• The offer to the public of crypto-assets is only addressed to qualified investors and the crypto-assets may only be held by such qualified investors.

None of the obligations apply in the following cases:

• The crypto-assets are offered free of charge;
• The crypto-assets are automatically created by mining;
• The offer relates to a utility token that provides access to a good or service that exists or is in use; or
• The holder of the crypto-asset has the right to use it only in exchange for goods and services in a limited network of merchants with contractual arrangements with the provider.

If your company provides services in the crypto sector, you may qualify as a CASP. One of the tokens you provide these services to must qualify as a crypto-asset, and the service you provide must qualify as one of the following:

1. Providing custody and administration of crypto-assets on behalf of clients;
2. Operation of a trading platform for crypto-assets;
3. Exchange of crypto-assets for funds;
4. Exchange of crypto-assets for other crypto-assets
5. Execution of orders for crypto-assets on behalf of clients;
6. Placing of crypto-assets;
7. Reception and transmission of orders for crypto-assets on behalf of clients;
8. Providing advice on crypto-assets;
9. Providing portfolio management on crypto-assets;
10. Providing transfer services for crypto-assets on behalf of clients.

If you qualify as a CASP, you must obtain a license from the regulator. This license is then valid for the entire EU. For this, your company must be a legal entity established in the EU. If your company wishes to offer these services in several Member States, the following information must be submitted to the local regulator:

1. A list of the Member States in which the CASP intends to provide the services;
2. A list of all crypto-asset services it intends to offer on a cross-border basis;
3. The starting date of the intended provision of the services; and
4. A list of all other activities carried out by the CASP that are not covered by MiCA.

MiCA includes a number of rules that apply to all CASPs, such as organisational requirements and prudential requirements. In addition, specific requirements are included per service that can be offered by a CASP. MiCA also distinguishes between three classes of CASPs. Based on this, minimum capital requirements are set for a CASP.

4.1 Custody and administration of crypto-assets on behalf of third parties

When your company provides custody and administration services on behalf of third parties, there are a number of rules that must be met:

1. The CASP enters into an agreement with the client that specifies their duties and responsibilities;
2. The CASP keeps a register of each position opened on behalf of a client;
3. The CASP shall establish a custody policy, which shall ensure that crypto-assets will not be lost through fraud, cyber-threats or negligence;
4. The CASP shall facilitate the exercise of the rights attached to the crypto-assets;
5. The CASP shall provide its clients with a position statement at least every three months;
6. The CASP shall ensure that necessary procedures are in place to return crypto-assets as soon as possible to its clients;
7. The CASP shall maintain segregated assets.

The custody and administration of crypto-assets is a Class 2 service. This means that the CASP must have a minimum capital of €125.000.

4.2 Operating a trading platform for crypto-assets

When your company operates a trading platform for crypto-assets, there are a number of rules that must be met:

1. The CASP establishes operating rules;
2. The CASP does not trade on its own trading platform for its own account;
3. The CASP has effective systems, procedures and arrangements to ensure resilience, sufficient capacity and order rejection;
4. The CASP makes any bid and ask prices and the depth of trading interests public through its own systems;
5. The CASP completes settlement of transactions on the same day as they are executed;
6. The CASP maintains transparent fee structures;

The operation of a trading platform is a Class 3 service. This means that the CASP must have a minimum capital of €150.000.

4.3 Exchanging crypto-assets for funds or other crypto-assets;

When your company exchanges crypto-assets for funds or other crypto-assets, there are a number of rules that must be met:

1. The CASP establishes a non-discriminatory policy regarding client acceptance and conditions;
2. The CASP publishes a firm price or a method of determining the price;
3. The CASP executes orders at the prices displayed at the time of reception;
4. The CASP makes public the details of orders and transactions.

The exchange of crypto-assets for funds or other crypto-assets is a Class 2 service. This means that the CASP must have a minimum capital of € 125.000.

4.4 Execution of orders for crypto-assets on behalf of third parties

When your firm executes orders for crypto-assets on behalf of third parties, there are a number of rules that must be met:

1. The CASP shall take all necessary steps to obtain the best possible result for its clients, unless the CASP executes orders in accordance with specific instructions from its client;
2. The CASP establishes and implements effective execution arrangements;
3. The CASP provides appropriate and clear information to its clients about its order execution policy and any significant changes thereto;
4. The CASP shall demonstrate to its clients, at their request, that they have executed their orders in accordance with their execution policy;
5. The CASP shall monitor the effectiveness of their order execution arrangements and policy.

The execution of orders for crypto-assets is a Class 1 service. This means that the CASP must have a minimum capital of €50.000.

4.5 Placing of crypto-assets

When your company places crypto-assets, there are a number of rules that must be followed:

1. The CASP shall communicate information to the issuer, before they enter into a contract, regarding:
   1. The type of placement considered;
   2. The amount of transaction fees involved in the proposed operation;
   3. The timing, process and price; and
   4. Information about the targeted purchasers.
2. The CASP shall obtain the issuer’s consent in relation to the above points prior to the placement;
3. The CASP shall include in the conflict of interest rules specific information relating to the following situations:
   1. The CASP places the crypto-assets with its own clients;
   2. The proposed price for the placement is over- or underestimated;
   3. Incentives, including non-monetary, are paid or granted by the offeror to the CASP.

Placement of crypto-assets is a Class 1 service. This means that the CASP must have a minimum capital of € 50.000.

4.6 Receiving and transmitting orders for crypto-assets on behalf of third parties

When your company transmits orders involving crypto-assets, there are a number of rules which must be complied with:

1. The CASP shall establish and implement procedures that provide for the prompt and proper transmission of client orders;
2. The CASP does not receive any renumeration, discount or non-monetary benefit for transmitting to a particular trading platform or CASP;
3. The CASP does not misuse information about pending orders and takes all reasonable steps to prevent misuses of such information.

The receipt and transmission of orders for crypto-assets is a Class 1 service. This means that the CASP must have a minimum capital of € 50.000.

4.7 Advice on crypto-assets and portfolio management of crypto-assets

When your company provides advice on crypto-assets or portfolio management of crypto-assets, there are a number of rules that must be met:

1. The CASP only recommends crypto-assets if it is suitable for its client, based on their knowledge, experience, objectives and financial situation;
2. The CASP shall inform potential clients of whether the advice is provided on an independent basis and whether the advice is based on a broad or on a more restricted analysis of different crypto-assets;
3. The CASP shall provide the potential clients with information on all costs and associated charges;
4. The CASP shall assess a sufficient range of crypto-assets and the CASP shall not accept and retain fees, commissions or any monetary or non-monetary benefits paid by any third party;
5. The CASP shall, in the case that the advice is provided on a non-independent basis, inform the client that the CASP can receive inducements under the conditions that the payment is designed to enhance the quality of the service and does not impair compliance with its duty to act honestly, fairly and professionally;
6. The CASP shall ensure that natural persons providing  advice or information on its behalf have the necessary knowledge and experience;
7. The CASP shall seek information on the client’s knowledge and experience with crypto-assets, on the client’s objectives, on the client’s financial situation and on a basic understanding of the risks associated with crypto-assets;
8. The CASP shall warn the client that the value of crypto-assets may fluctuate;
9. The CASP informs clients that crypto-assets may be unsuitable for them and warns them of the risks if the CASP believes that the client has insufficient knowledge;
10. The CASP shall review its assessments for each client every two years;
11. The CASp provides client with a summary of the advice provided to that client and with periodic statements of the activities carried out on behalf of that client.

Advice on crypto-assets and portfolio management of crypto-assets is a Class 1 service. This means that the CASP must have a minimum capital of € 50.000.

4.8  Providing transfer services for crypto-assets on behalf of third parties

When your company provides transfer services for crypto-assets on behalf of third parties, there are a number of rules that must be met:
1.     The CASP shall enter into an agreement with their clients to specify their duties and responsibilities. Such agreement shall include at least the following:

1. The identities;
2. The modalities of the transfer provided and a description of that service;
3. A description of the security systems used by the CASP;
4. The charges applied by the CASP;
5. The law applicable to the agreement.

Providing transfer services for crypto-assets on behalf of third parties is a Class 1 service. This means that the CASP must have a minimum capital of € 50.000.

In addition to rules relating to the issuance of crypto-assets and CASPs, MiCA also contains rules to prevent market abuse. This concerns crypto-assets that have been admitted to trading on a trading platform, or for which a request for admission has been made. Four forms of market abuse can be distinguished:

1. Disclosure of inside information
2. Insider dealing;
3. Unlawful disclosure of inside information; and
4. Market manipulation.

The supervisory authority can impose a sanction if one of these forms of market abuse is violated. For a legal entity this is a maximum of € 15.000.000 or 15% of the annual turnover. The maximum penalty for natural persons is € 5.000.000.

5.1 Disclosure of inside information

Inside information is non-public information that is concrete and that directly or indirectly concerns an issuer of crypto-assets, or these crypto-assets themselves. This information must not have been disclosed to the public and disclosure must have a significant effect on the price. The issuer of a crypto-assets should disclose this inside information as soon as possible. This can only be delayed if the following conditions are met:

1. Immediate disclosure would likely harm the legitimate interests of the issuer;
2. It is not likely that the public would be misled by the delay;
3. The issuer is able to ensure the confidentiality of that information.

5.2 Insider dealing

Insider information may not be used to acquire or dispose of the crypto-assets to which it relates. This applies to both the crypto-assets held by the holder and to crypto-assets held by another person. A person who possesses inside information may also not make recommendations to another person about the crypto-assets concerned.

5.3 Unlawful disclosure of inside information

A person who possesses inside information may not disclose it to another person unless this is in the course of the performance of his work, profession or duties.

5.4 Market manipulation

Market manipulation in relation to crypto-assets has in recent years had a significant negative impact on the perception of crypto-assets and blockchain projects, through so-called ‘pump and dumps’ and other practices. There are several forms of market manipulation:

1. Entering into a transaction, placing an order or any other conduct that:
   1. Provides false or misleading signals regarding the supply of, demand for or price of a crypto-assets;
   2. Actually causing or likely to cause the price of one or more crypto-assets to reach an abnormal or artificial level.
      These actions are prohibited, unless it is proven that there were other justified reasons for doing so.

2. Entering into a transaction, placing an order or any other behavior involving fraud or deception;
3. Dissemination of information which is false or misleading as to the supply of, demand for or price of a crypto-asset.

From a European perspective, the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) monitor compliance with MiCA. The national competent authorities are the Financial Markets Authority (AFM) and De Nederlandsche Bank (DNB). The national regulator issues licences and monitors compliance with licence conditions and other requirements. The AFM is responsible for licence applications for CASPs and DNB for those for issuers of ARTs/EMTs. EBA and ESMA oversee the national regulators.

Q: I am already authorised under MiFID II, do I need to get an authorisation under MiCA as well?

A: MiCA contains a provision allowing an investment firm to offer crypto-asset services equivalent to the investment services and activities for which it is specifically authorised under MiFID II. For example, holding and managing crypto-assets on behalf of clients is deemed equivalent to holding and managing financial instruments on behalf of clients, and exchanging crypto-assets for cash is deemed equivalent to dealing on own account. If an investment firm wishes to make use of this arrangement, it must notify the regulator 40 days before offering the crypto-asset services, providing certain information.

MiCA contains no such provision for offering ARTs/EMTs. If an investment firm intends to offer ARTs/EMTs, it must apply for authorisation as a provider of ARTs/EMTs.

Q: When does my firm offer services ‘in Europe’?

A: The regulator fairly quickly assumes that services are offered ‘in Europe’. Only when a company is based outside Europe, and the services are provided solely at the initiative of the European client, is there no question of offering services ‘in Europe”.

Q: What is the difference between a CASP and a VASP?

A: Since 2019, the term VASP (Virtual Asset Service Provider) has been used within the EU. This term was introduced by the Financial Action Task Force (FATF). The term CASP, which is now being introduced with MiCA, shows many similarities to the term VASP, but is broader and therefore covers more firms.

Q: I already have a registration with DNB based on the Wwft, what will happen to this?

A: The Wwft registration for crypto service providers will not coincide with the MiCA licensing requirement for CASPs. This follows from a provision from the Transfer of Funds Regulation Recast (TFR) under which the current provision establishing the registration requirement will be replaced. It is therefore not necessary to apply for both a Wwft registration and MiCA licence.

AFM and DNB call on firms wishing to start offering crypto-asset service voice in the Netherlands to apply to the AFM for a MiCA licence application for CASPs, and no longer to DNB for a Wwft registration application. This will avoid duplication of work and costs for all involved. It has been possible since 22 April 2024 to submit a MiCA licence application for CASPs to the AFM.

Q: I offer my services in multiple Member States, do I need to apply for multiple licenses?

A: There is a so called ‘passport regime’ for MiCA. This means that obtaining an authorization in one Member State allows the services to be offered in other Member States as well.

Q: How do NFTs fall within the framework of MiCA?

A: NFTs fall under the heading of ‘crypto-assets other than ART or EMT’. This means that only a duty could exist for the preparation of a white paper. However, certain NFTs are exempt from this, as crypto-assets that are not ‘fungible’ with other crypto-assets fall outside the scope of MiCA. The non-fungibility of a token must be assessed on a case-by-case basis.

Importantly, fractional parts of a unique and non-fungible crypto-asset should not be considered unique and non-fungible. The issuance of crypto-assets as non-fungible tokens in a larger series or collection should be considered as an indicator of their fungibility. For example, the mere assignment of a unique identifier is not sufficient to designate a token as unique or non-fungible.

Q: Are non-custodial wallets regulated under MiCA?

A: No. Only the custody and management of crypto-assets on behalf of third parties is regulated under MiCA. Non-custodial wallets allow users to store their own private keys and are therefore not regulated under MiCA.

Q: Are trading bots regulated under MiCA?

A: Depending on the circumstances of the case, trading bots may be regulated as CASP. This is the case at least when it involves receiving and transmitting orders, providing advice on crypto-assets or providing portfolio management. To qualify as advice, it is important that the bot makes recommendations personalised to a specific consumer.