Herbert Smith Freehills | May 18, 2023

MiCA is likely to enter into force in July 2023 following publication in the Official Journal, with some provisions applying a year later and the rest from January 2025.

• Timing: If, as is widely expected, MiCA enters into force in July 2023:
  • Provisions relating to asset reference tokens (ARTs) and e-money tokens (EMTs) will apply 12 months later, in July 2024.
  • Other provisions will apply 18 months after entry into force, in January 2025.
  • Transitional and grandfathering arrangements will be available in some circumstances e.g unless a Member State chooses not to apply the transitional regime or chooses to reduce its duration, crypto-asset service providers (CASPs) providing services before MiCA becomes applicable should be able to continue to do so for a further 18 months after MiCA starts to apply or until they become authorised. Transitional measures are also available to operators of trading platforms and issuers of ARTs.

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• What will MiCA mean for crypto businesses?
  • MiCA’s impact on businesses which are not currently authorised will be significant, although the onerousness of the obligations under MiCA will depend on the types of cryptoasset being issued and activities being carried on.
  • Although grandfathering and transitional regimes will be available, firms must not underestimate the time it will take to implement MiCA, from assessing MiCA’s scope, to applying for authorisation and implementing MiCA requirements into their systems and processes.
    • Authorisation and notification
    • Compliance framework
    • Updating paperwork for written agreements, client terms, white paers
    • Sustainability
    • Liability
• What does MiCA mean for non-EU businesses?
  • MiCA, the Markets in Crypto-Assets Regulation, applies to entities involved in issuing, offering to the public, trading cryptoassets, or providing related services within the European Union (EU). Non-EU businesses planning to engage in cryptoassets activities within the EU or with EU customers need to assess how MiCA’s territorial scope will affect their current and future business models.
  • They should consider whether seeking authorization under MiCA is necessary and how promotions or advertisements accessible to EU customers may be regarded as providing services or conducting crypto activities within the EU.
  • Additionally, businesses should determine if they can rely on MiCA’s reverse solicitation provisions.
  • Businesses considering establishing operations in the EU should take note that MiCA requires Crypto-Asset Service Providers (CASPs) and Asset-Reference Token (ART) issuers to have a registered office within the EU.

See:  MiCAR: EU Crypto Regulation in the Making

• MiCA 2.0, a potential future version of the Markets in Crypto-Assets Regulation, has been proposed by some entities even before MiCA 1.0 has come into effect. The European Central Bank has advocated for MiCA 2.0 to expand its coverage to include cryptoassets staking and lending, decentralized finance (DeFi), and assets like Bitcoin that lack a clearly identifiable issuer.
  • MiCA already incorporates review mechanisms to assess its application. The European Commission will release an interim report on MiCA’s implementation within two years of its enforcement (around mid-2025).
  • Additionally, a final report is expected within four years of MiCA coming into effect (around mid-2027). These reports may be accompanied by legislative proposals, indicating potential adjustments or amendments to the regulation.

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• Source: https://ncfacanada.org/mica-is-likely-coming-into-force-july-2023-key-takeaways/