A Guide to Anti-Money Laundering for Crypto Firms

EU Lawmakers Approve MiCA Bill to Regulate Crypto

Regulation Crypto Latest News

On October 10, 2022, the European Parliament Committee on Economic and Monetary Affairs (ECON) endorsed the approved text for the Markets in Crypto-assets regulation (MiCA). While the bill’s main provisions were agreed upon in June, the approved text sets out a harmonized crypto regulatory framework that supports innovation and fair competition while ensuring market integrity and a high level of protection for retail holders. 

While MiCA broadly applies to cryptoasset service providers (CASPs) providing crypto services to EU residents, some areas fall outside of MiCA’s scope. These include crypto-assets that:

  • Are unique and not fungible with other crypto-assets, such as digital art and collectibles
  • Qualify as financial instruments as defined under Directive 2014/65/EU, such as security tokens
  • Represent services or physical assets that are unique and not fungible, including real estate or product guarantees
  • Are offered for free, or are automatically created

Classification of crypto-assets

The MiCA bill introduces three sub-categories of crypto-assets based on whether an asset seeks to stabilize its value in relation to other assets. These include asset-reference tokens, e-money tokens, and other crypto-assets.

Asset-reference tokens are assets that maintain a stable value by referencing several currencies, one or several crypto-assets, one or more commodities, or a combination of such assets. Contrastingly, e-money tokens are assets that aim to stabilize their value by referencing only one official currency, such as stablecoins. All other crypto-assets that do not fall into either of the aforementioned groups make up MiCA’s third sub-category. 

CASP requirements

Under MiCA, potential retail holders of crypto-assets must be informed about the characteristics, functions, and risks of the crypto-assets they intend to purchase. Therefore, CASPs will be required to compile a whitepaper containing general information on the

  • Issuer and offerer
  • Rights and obligations attached to the crypto-assets
  • Underlying technology used for such assets
  • Related risks

Prior approval for marketing communications will also be required for asset-reference and e-money tokens. All advertising messages and marketing materials should be fair, clear, not misleading, and aligned with the information provided in the crypto-asset whitepaper. 

Further requirements for asset-reference tokens and e-money tokens include regulatory approval before launching new services and vetting key management personnel. Regarding management, the bill notes that issuers of asset-referenced tokens should have robust governance arrangements, including a clear organizational structure and effective processes to identify, manage, monitor, and report the risks to which they are or might be exposed.

More information on the key takeaways for CASPs can be found here.

Next steps

The MiCA bill points to a more comprehensive, strategic view of crypto assets being adopted by the EU and a greater understanding of how they integrate into the broader financial services ecosystem. 

Before the act can be signed into the Official Journal, it must be voted on at a European Parliament plenary session, possibly in November. If no amendments are made, the bill will move on and be signed into law during December’s plenary session. From then, crypto firms will have up to 18 months to prepare themselves for the changes, with the bill likely coming into effect in 2024.  

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Originally published October 14, 2022, updated October 14, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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