A three-phase consultation period has been announced by the European Securities and Markets Authority (ESMA) to develop and agree on how best to implement the provisions contained within the Markets in Crypto Assets (MiCA) regulation, the European Union’s landmark digital asset legal framework.
MiCA, signed into law at the beginning of June, institutes a new regulatory framework for digital assets to be applied across the European Union. It is a comprehensive piece of legislation mandating that exchanges and wallet providers must obtain a license from national regulators in order to offer services to EU citizens; stablecoins must be backed by a 1:1 reserve of assets and more.
As what’s known as a ‘level 1’ piece of EU legislation, MiCA leaves a number of specific implementations up to the European Commission and various EU supervisory authorities, such as ESMA. It is about these ‘level 2’ and ‘level 3’ implementations that ESMA is holding the consultation period in conjunction with the European Banking Authority (EBA), the European Central Bank, and the European Insurance and Occupational Pensions Authority.
The first consultation will kick off in July and covers a range of implementations, including:
- The specific information which financial entities providing digital asset services must submit to national regulators
- The procedure and form that must be adhered to in submitting that information
- The precise information that digital asset service providers must submit to regulators in order for licensing
- Complaint handling procedures
- Policies and procedures on the management, prevention, and disclosure of conflicts of interest
Phase 2 kicks off in October, while Phase 3 is not expected until Q1 2024. The exact scope of the later phases has yet to be determined, according to ESMA. Phase 2 is broadly expected to cover the disclosure of information to investors, digital asset service provider governance requirements, and trade transparency rules. For Phase 3, “themes may include investor protection rules and rules to counter market abuse,” according to the ESMA website.
The delegated legislation from this consultation period will account for the final implementation of MiCA.
The staggered approach to the consultation period reflects the MiCA text, which mandates dates by which certain elements of the framework are to come into force. The rules concerning stablecoins, for instance, will come into force on June 30, 2024. The entirety of the MiCA rules and its delegated legislation will be in force by December 30, 2024.
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