In response to studies commissioned by the European Commission and conducted in 2017 and 2018 to assess the applicability of current financial market law to cryptocurrencies by European financial supervisory authorities, the European Commission adopted the Digital Finance Package ( DigFin ) on 24 September 2020, intended to increase the competitiveness and innovation of the European Union in the financial sector.
The presented strategy aims to unify the rules of operation of entities providing financial services on the European market, including through virtual assets .
The designated project works include in particular: a digital finance strategy, a draft regulation on digital operational resilience (DORA), a draft regulation on distributed ledger technology (DLT) and a draft regulation on crypto-asset markets (MiCA).
The legislative strategy included in the adopted digital finance package is based on 4 main assumptions:
- unification of the digital market for financial services, thereby making cross-border services available to European consumers, introduction of a pan-European licensing process for activities based on virtual values,
- protecting consumers and investors against threats arising from new digital services,
- stimulating digital innovation by establishing a clear, general EU regulatory framework, facilitating the operation of cross-border services within the EU,
- development of European financial databases, increasing access to data within the financial sector.
Among the planned regulations, the draft regulation of the European Parliament and of the Council on markets in crypto-assets and amending Directive (EU) 2019/1937, commonly referred to as “MICA” ( Regulations of Markets in Crypto-assets ), deserves special attention.
Currently, activities related to the issuance of cryptoassets, the provision of services based on distributed ledger technology, and their introduction to trading depend on the solutions implemented in a given EU country and on anti-money laundering and terrorism financing regulations. Regulatory chaos, the lack of uniform legal provisions, and the lack of a common position among EU member state supervisory authorities on the legal classification of cryptoassets mean, on the one hand, difficulties in conducting international business within the European Union, and, on the other, a lack of protection for entities purchasing cryptoassets on the market, as well as investors interested in developing innovative projects.
MICA aims to provide a much greater degree of legal certainty, remove fragmentation among national systems and ensure that cryptocurrencies can be introduced into circulation from a single point of entry, through a unified licensing process.
On the one hand, this means significant regulatory pressure on all entities conducting or planning to conduct business related to virtual assets. On the other, it is a key step towards changing the perception of cryptocurrencies as highly risky, protecting individual and institutional customers from common market threats, and consequently increasing trust in cryptocurrencies. It should be noted, however, that overly restrictive solutions may adversely affect the European cryptocurrency market.
According to official communications, legislative work on the MICA regulation is expected to be completed by early 2022. Implementation could then take up to two years. Due to the groundbreaking nature of the planned solutions, we strongly encourage you to follow the development of this project with us.
This alert is for informational purposes only and does not constitute legal advice.
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