10 Facts About MiCAR: Key Insights for Companies in Digital Assets

The Markets in Crypto Assets Regulation (MiCAR) is set to transform the crypto landscape across the European Union (EU). Whether you’re a crypto investor, an exchange, or a service provider, understanding MiCAR is essential to ensuring compliance and staying competitive in this new regulatory environment.

With 5 years of experience under German regulation and our own in-depth work on MiCAR, Tangany can provide insights based on our experience. As a digital asset custodian adapting to these new regulations, we understand the challenges financial institutions and corporations may face.

In this article, we’ll answer 10 key questions about MiCAR to help your business stay ahead of the curve.

1. What is MiCAR, and why is it important for the EU crypto industry?

MiCAR is the first EU-wide regulation focused specifically on crypto assets. The regulation provides legal clarity and aims to protect investors across all 27 EU member states. Before MiCAR, the regulatory landscape was fragmented, with each country applying its own rules. MiCAR unifies these approaches, creating a consistent regulatory framework across the entire EU. 

This consistency will benefit businesses by offering a clear regulatory path, enabling smoother operations across borders.

2. Does MiCAR apply to all European countries?

Yes, MiCAR applies to all 27 EU member states. Additionally, EEA countries—Norway, Iceland, and Liechtenstein—are likely to adopt MiCAR or implement similar regulations to maintain consistency with EU laws.

However, Switzerland and the United Kingdom are not covered by MiCAR, as they are outside both the EU and the EEA. Businesses in these countries that wish to operate in the EU will likely need to comply with MiCAR’s rules if they want to offer services within the EU market.

3. Which crypto assets and services are covered under MiCAR?

MiCAR regulates a wide range of crypto assets and services. It applies to crypto-assets like Bitcoin and Ethereum, as well as more specialized tokens such as asset-referenced tokens (ARTs) and e-money tokens (EMTs) (commonly referred to as stablecoins). MiCAR also covers crypto trading platforms, custody services, wallet providers, and token issuers, ensuring that the majority of crypto-related activities fall under its scope.

4. What are the key deadlines for MiCAR compliance?

MiCAR’s implementation will occur in stages, with key deadlines for businesses to meet. For example, stablecoin issuers had to comply by June 2024, while crypto asset service providers (CASPs) will have until July 2025 to ensure they meet MiCAR’s standards. Staying aware of these deadlines is essential to avoid potential disruptions or penalties.

5. Who needs a license under MiCAR?

MiCAR will likely impose licensing requirements on a wide range of Crypto Asset Service Providers (CASPs). These licenses ensure that businesses operating in the crypto industry meet regulatory standards for transparency, security, and consumer protection.

It’s irrelevant whether a service is in or outside of the EU. As long as EU-citizens are approached or marketed, MiCAR becomes relevant. A MiCAR license requires a local branch in the EU or a local partner in the EU who is already licensed.

Below is a list of the key types of entities that will need a MiCAR license, along with examples to help you understand which category your business might fall under:

• Crypto Exchanges

• Custodial Service Providers

• Wallet Providers

• Token Issuers

• Consultants for Digital Assets

If your business provides any of these services, MiCAR will likely introduce new obligations regarding licensing, transparency, and consumer protection.

MiCAR’s licensing requirements may also extend to other businesses involved in crypto transactions or asset management. Depending on the services you offer, you may fall into more than one category. Securing the appropriate license will be essential to legally operating within the EU.

Once licensed, your business can operate across all 27 EU member states via MiCAR’s passporting system, eliminating the need to obtain separate licenses in each country.

For a more detailed breakdown of licensing requirements, check out:

Understanding MiCAR Licenses: An Overview of Key Requirements

6. What is MiCAR doing to protect consumers?

MiCAR introduces several measures to enhance consumer protection. It mandates that token issuers provide comprehensive whitepapers outlining the risks, technical details, and rights associated with the crypto asset. Additionally, businesses must provide clear and transparent information about the risks involved in investing in crypto assets, helping customers make informed decisions.

Custodians are, for one, obligated to maintain a comprehensive set of insurance coverage.

7. How will MiCAR regulate stablecoins?

MiCAR introduces strict oversight for stablecoins, especially those pegged to fiat currencies, such as the Euro. These include both e-money tokens (EMTs) and asset-referenced tokens (ARTs). Issuers will need to maintain adequate reserves to cover the full value of the tokens issued. In addition, regular transparency reports must be submitted to regulators to ensure that token holders can redeem their tokens for their corresponding value in fiat currency at any time.

8. What does MiCAR mean for crypto custody services?

For crypto custody services, MiCAR requires enhanced standards to protect client assets. Custodians must segregate client assets from company-owned assets, adopt strong security measures, and provide transparency through regular reports to regulators. These higher standards aim to protect customers' digital assets and ensure the security of funds in custodial care.

As MiCAR explicitly does not cover all digital assets, national regulation regimes will continue to exist. In Germany, the German Banking Act regulates security tokens, NFT, and German crypto security in parallel to MiCAR.

9. What are the consequences of non-compliance with MiCAR?

Non-compliance with MiCAR can result in penalties, including fines and restrictions on operations. Businesses that fail to meet MiCAR’s standards could be fined up to 5% of their annual turnover and could face other enforcement actions, such as the suspension of licenses or being banned from operating within the EU.

That said, it’s critical to take early steps to ensure compliance and avoid these penalties.

10. How should businesses prepare for MiCAR’s full implementation?

We, at Tangany, prepared ourselves by:

1. Getting high-quality legal advice from legal advisors

2. Identifying which licenses we needed based on the services we offer

3. Conducting a compliance audit to ensure alignment with MiCAR’s requirements for AML/KYC, consumer protection, and operational transparency

4. Setting up a product and compliance roadmap on how to implement MiCAR

Starting preparations now will help ensure a smooth transition and avoid any last-minute compliance challenges.

Stay Ahead of MiCAR

MiCAR will play a pivotal role in shaping the future of the crypto industry in Europe. Preparing early and ensuring compliance will help you avoid disruptions and position your business for success within the EU’s regulated market.

If your business lacks the time, resources, or capacity to meet MiCAR's regulatory requirements, partnering with Tangany can provide a seamless solution. With our compliant and fully-regulated digital asset custody services, we help you navigate MiCAR effortlessly, allowing you to focus on growing your business. Contact us today to get started.

Disclaimer
This content is for informational purposes only and does not constitute legal advice. Tangany is not a law firm and is not liable for any decisions or actions taken based on this article. Always consult with a qualified legal professional for specific advice regarding regulatory compliance.