Issuers and Service Providers: Crypto Assets, EMTs, and ARTs-Exploring the roles and responsibilities of various stakeholders in the crypto ecosystem
Issuers of Crypto-Assets
MiCA requirements for crypto asset issuers
Issuers of digital assets covered by MiCA, i.e. those who sell digital assets to third parties, may be subject to a number of duties, including but not limited to:
1. Prospectuses distributed in accordance with the prospectus regulation and the publication of a whitepaper share some characteristics.
2. The requirement for authorization before issuing cryptoassets.
3. Adherence to specific prudential regulations while promoting crypto assets
4. The responsibility to behave honorably, equitably, and professionally toward owners of digital assets, particularly with regard to conflict resolution and the establishment or upkeep of security access protocols.
The sort of crypto asset offered and the size of the offer are two factors that affect which regime is applicable.
Issuers of EMT and ART
On the other hand, due to associated concerns surrounding financial stability and monetary sovereignty, MiCA lays forth stronger regulations for issuers of the stablecoin variations EMTs and ARTs. ARTs and EMTs may only be publicly offered or listed in the EU with previous consent from the issuer unless the issuer grants another person written permission to do so.
Only authorized credit institutions or e-money institutions are permitted to offer or list EMTs, and only after notifying their supervisory authority beforehand and publishing the necessary white paper. It's interesting to note that when an EMT refers to a union currency, it will automatically be seen as being sold in the EU and be governed by the rigorous MiCA requirements. Legislators decided to use extensive references to the e-money Directive 2009/110/EC to regulate the rights and obligations of EMT issuers, including references to capital requirements and regulations on the safekeeping of received funds, because EMTs and e-money are comparable to each other. The MiCA itself largely lays forth additional restrictions, such as those for the investment of received cash, as well as a few exceptions to the e-money regime.
In contrast to the requirements for the other MiCA-token kinds, issuers of ARTs must be established in the EU in order to get authorization and must not only notify but also submit the necessary white paper for prior approval to the responsible authority before publishing it. Compared to other crypto assets, the approval procedure under the Prospectus Regulation is more comparable to ARTs in this regard. As a result, MiCA itself specifies a comprehensive list of obligations and rules that apply to issuers of ART, including capital requirements, significant governance restrictions, and requirements for transparency.
While EMT issuers are required to protect monies received, ART issuers are also required to keep an asset reserve in accordance with the requirements. The reserve requirements will guarantee that issuers won't encounter any liquidity problems when confronted with numerous simultaneous redemption requests because MiCA states that EMT and ART investors have the right to redeem their tokens at any moment. As a result, the reserve must always be equal to the whole amount of all outstanding holders' claims.
In addition, and under great discussion, MiCA essentially caps at 1 million and 200 million, respectively, the daily average number of transactions and trading volume associated with the use of EMTs and ARTs as means of exchange. This only applies to an EMT when the token is valued in a currency other than one used as the official currency of an EU member state. Due to their significant trading volumes, it has been anticipated that these regulations could lead to the EU stifling of well-known USD-pegged stablecoins like Tether's USDT, Circle's USD coin, and Binance's USD. The regulation makes it clear, nonetheless, that not all types of transactions would be connected to usage as a medium of exchange.
Crypto-Asset Service Providers
When performed and delivered in relation to any type of crypto asset falling under the purview of MiCA, a few typical services must be captured and governed by MiCA. Among the services that qualify as crypto-asset services are the custody, management, and guidance provided regarding crypto-assets on behalf of third parties. To qualify as a crypto asset service provider, an entity must offer crypto asset services.
To offer services involving digital assets, providers must need a license. Crypto-asset service providers must meet certain requirements before being granted permission to use a European passport. The applicable regime, in terms of completing requirements and adhering to prudential norms, somewhat resembles the current MiFID and market abuse regimes.
As a "crypto-asset service provider" (CASP, Art. 53o MiCA), you must typically obtain prior authorization before offering crypto-asset services in the EU. MiCA establishes a comprehensive set of general and service-specific requirements that CASPs must follow. These include regulations for transparency, money, and insurance.
In terms of transparency, CASPs are obligated to disclose any negative effects the consensus mechanism used to create the crypto-asset may have on the environment and the climate. When they surpass a threshold of 15 million active users inside the EU on average in one calendar year, CASPs are automatically labeled as substantial (CASP) by legislation. However, CASPs are not subject to more stringent regulations than ordinary CASPs, unlike ARTs and EMTs.
In conclusion, the new CASP requirements under MiCA include (but are not limited to):
• Having an office in an EU nation and at least one director who resides there.
• Implementing data security, continuity of services, and anti-money laundering (AML) policies and procedures.
• Adhering to marketing communication guidelines.
• Adopting specific procedures for stopping market exploitation and properly handling complaints (this is done to prevent other incidents like Terra Luna and FTX). CASPs will have to alert both their clients and their users about the dangers of the transactions they execute, as an illustration of a new practice;
• Displaying integrity, fairness, and professionalism.
• Publicly disclosing pricing, cost, and charge rules as well as details on how the use of crypto assets affects the environment;