Interpret Mica’s far -reaching impact on Web3, DEFI, stabilization and ICO projects

Source: Aiying Compliance

With the “Crypto Asset Market Regulations” (MICA) will take effect on June 30, 2024, the main cryptocurrency exchanges such as Binance, Kraken, and OKX are considering the USDT of Tether on its European platform.Binance announced that after MICA will take effect, it restricts users in the European economic zone with unauthorized stablecoins and gradually guide users to use regulatory stablecoins.Although the existing unauthorized stablecoin will not be removed, it is set to the “only sell” mode so that users can be converted into Bitcoin and regulated stable currency or fiat currency.

At the same time, member states are adjusting their respective regulations and regulatory frameworks to meet the MICA standards.Some countries have begun to implement training supervisors for MICA, and have established technical infrastructure supporting new regulations.

The EU MICA Act, most of the terms have been implemented on December 30, 2024. Some special terms will be advanced to June 30, 2024, and the technical terms will take effect from June 29, 2023.The implementation arrangement of this sequence aims to ensure that the market has enough time to prepare and adjust, and ensure the smooth transition and orderly development of the crypto asset market.(Plated stages, the deadline is 12 to 18 months).As shown in the figure below:

The main content of the bill covers the following main contents:

• The transparency and disclosure requirements of encrypted assets on the issuance, providing and transaction platforms on the trading platform;

• The requirements for the authorization and supervision requirements of crypto asset service providers, asset reference token issuers and electronic currency token issuers, as well as their operating, organizational and governance requirements;

• Crypto assets’ protection requirements for holders in the issuance, providing and transactions to the public;

• The protection requirements of encrypted asset service providers;

• Measures taken to prevent insider trading, illegal disclosure of internal information and market manipulation to ensure the integrity of the encrypted asset market.

Aiying Aiying will analyze the MICA bill through the nine modules:

• The definition and application of the bill

• The transparency and disclosure requirements of cryptocurrency projects

• Application and obligations

• Measures for protecting investors and customer rights

• Prevent insider trading and market manipulation requirements

• Illegal punishment

• International cooperation and coordination supervision

• The MICA Act may bring the impact

• Can the MICA Act become a global standard?

1. The definition and scope of the bill

1,European MICA Act Related Definition:

Here is a supplement to the “Crypto Asset Market Regulations” (MICA) to the asset reference tokens (ARTS) and electronic currency tokens (EMTS), Crypto-Asset Service Providers (CASP, Crypto-Asset Service PROVIDERS).Other related requirements.The following are specific amounts and requirements:

(1) Asset reference tokens (Arts)

Arts is a stable currency, which is linked to multiple currencies, goods or other encrypted assets.Mica’s specific requirements for Arts include:

• Reserve requirements: Companies that issue ARTS must hold sufficient reserves to ensure the stability of the tokens.The reserve should be equal to or exceed the total value of the issued token.

• Amount limit:The daily transaction volume of a single ART must not exceed 5 million euros.If ART’s market value exceeds 500 million eurosThe issuance company must report to the regulatory agency and take additional compliance measures.

• Transparency and report: The distribution company needs to regularly disclose the detailed information and financial statements of the reserve to ensure transparency.Report to the issuance and reserves of tokens to regulators every month.

(2) Electronic currency tokens (EMTS)

EMTS is a stable currency, which is linked to a single legal currency.Mica’s specific requirements for EMTS include:

Reserve requirements: Companies that issue EMTS must hold the equivalent of legal currency reserves to ensure the stability of the tokens.The reserve should be equal to or exceed the total value of the issued token.

Amount limit:The daily transaction volume of a single EMT must not exceed 5 million euros.If EMT’s market value exceeds 500 million eurosThe issuance company must report to the regulatory agency and take additional compliance measures.

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It is necessary to comply with the minimum requirements of governance, asset storage, complaint processing, outsourcing, liquidation plan (Wind-DOWN PLANS), information disclosure, and the most important prudent requirements-CASPS needs to maintain permanent minimum capital (“own funds”):

• The trading platform needs to maintain a minimum permanent capital (“own funds”) to 150,000 euros

• The custodian and the exchange (broker) need 125,000 euros

• All other CASPS needs 50,000 euros

2. Scope of application

Second, the transparency and disclosure requirements of encrypted projects

EU Crypto Asset Market Regulations (EU) 2023/1114 In terms of transparency and disclosure requirements, through detailed white paper writing and release processes, strict information update requirements, and standardized marketing materials to ensure the market transparency of the project distribution, protect investorsRights and interests.The following is the details of the project issuance requirements:

3. Application and obligations of licenses

1,License application

(1)Application qualification:

• Only companies that meet specific conditions can apply for and obtain a license to obtain crypto asset services.This includes the company’s must have a sound legal structure, a good financial situation, and a reliable management team.

• For example, the company must be a legal person or other legal forms.

(2),,,,Application file:

• When applying for a license, the company needs to submit a series of files, including:

• Company name, legal entity identifier, website, contact information and actual address.

• The company’s legal form and articles of association.

• Detailed operating plans, describe the types of encrypted asset services provided by the plan and their marketing methods and locations.

• Prove that applicants meet the documents of prudent guarantee requirements.

• The description of the company’s governance structure, including the background investigation report of management members, ensures good reputation and has the knowledge and experience of management company.

• The identity information of the main shareholders or members and their shareholding is ensured that these people are well reputable.

• The description of internal control mechanism, risk management procedures, anti -money laundering and counter -terrorism financing measures, and business continuity plan.

• Information and communication technology (ICT) system and security arranged technical documents.

• Description of customer assets and capital separation procedures.

• Description of customer complaint processing procedure.

(3),,,,Review process:

• After receiving the complete application materials, the competent authorities must review and make a decision within the specified period.

• Once the authorization is obtained, the types of service provided by the encrypted asset service provider must be clarified.

• Authorized information must be notified of the European Securities and Market Administration (ESMA) and recorded in a public registry.

2. The obligation of the license holder

(1) Compliance operation:

• Companies that obtain licenses need to continue to meet the authorization conditions and regularly report the operation of the authorities to the competent department.

• The company needs to maintain a sound internal control mechanism and risk management procedures to ensure its operational compliance and safety.

(2) Cross -border service:

• The company that obtains licenses can provide services within the European Union without having to set up a physical office in each member country, but it is necessary to notify and provide relevant information to the competent department of the destination member states.

(3) Management changes and business expansion:

• If the company’s management changes, it is necessary to immediately notify the competent department and provide all the necessary information to evaluate its compliance.

• If the company wants to increase the new service type, it is necessary to apply to the competent department for expansion licenses and supplement the update related information.

(4) Regular supervision and inspection:

• The competent department has the right to conduct on -site inspections and requires any information related to operation to ensure the company’s continuous compliance.

• The company needs to cooperate with the inspection of the competent department and provide all the necessary operating information and data.

(5) illegal treatment:

• The competent authority can revoke the company’s license, including but not limited to:

• It was not used within 12 months after authorization.

• No crypto asset services have been provided for 9 consecutive months.

• Agree through unfair means.

• Remedial measures were not met and remedy was not taken within the prescribed period.

• Serious violations of regulations, including violations of customer protection and market integrity.

4. Measures for protecting investors and customer rights and interests

1. Protection of investor rights and interests

(1) Information transparent:

• Companies that issue encrypted assets must provide detailed and accurate information to let investors know what they buy and what risks and income.

• This information includes the company’s details, the technical details of encrypted assets, transactions and distribution methods, and potential risks.

(2) Treat fairly:

• The company must ensure that all investors are treated fairly during the transaction and cannot have any form of discrimination.

• If there is special treatment, it must be clearly stated in the white paper and marketing materials to ensure transparency and fairness.

(3) Risk disclosure:

• The company must fully explain the possible risks, including technical risks, market risks and legal risks, so that investors can clearly invest in the risk of investment.

2. Customer fund protection

(1) Independent custody:

• The company must separate the customer’s funds from the company’s funds to ensure the security of customers’ funds.

• This is to prevent the company from misappropriating customer funds and protect the interests of customers when there is a problem with the company.

(2) Compensation mechanism:

• If there is a problem or breach of contract, there must be a clear compensation and compensation mechanism to ensure that customers can get compensation in time.

• The company needs enough resources and arrangements to compensate.

(3) Transparent pricing:

• The company must disclose all charging standards and fees to ensure that customers know the specific situation of each fee.

• This information should be announced on the company’s website to ensure transparency.

3. Investor appropriateness evaluation

(1) Customer information collection:

• When providing suggestions or managing customers assets to customers, service providers need to collect relevant information about customers, including investment experience, risk tolerance and financial conditions.

• This information is used to evaluate whether encrypted assets are suitable for customers and ensure that it is recommended to meet customers’ investment goals and risk preferences.

(2) Risk warning:

• Service providers need to clearly inform customers of the relevant risks of crypto assets, including value fluctuation risks, liquidity risks and possible full -amount losses.

• Customers need to understand that crypto assets are not protected by traditional investor compensation plans and deposit guarantee plans.

(3) Regular evaluation:

• Service providers need to review the appropriate assessment of customers regularly (at least every two years) to ensure that their recommendations and services are always

• It meets customer needs and risk tolerance.

4. 4..Customer complaint handling

(1) Complaint processing procedure:

• The company must have effective complaint processing procedures to ensure that they can handle complaints from customers in a timely and fair manner.

• Customers can submit complaints for free. The company needs to provide a complaint template and record all complaints and processing results.

(2) Complaint transparency:

• The company must openly complained the process of processing procedures on its website to allow customers to understand the complaint process and solution.

• The company needs to investigate all complaints within a reasonable time and notify customers.

five,Prevent insider trading and market manipulationRequire

1. 1.Insider transaction defense

(1) Definition of insider information:

• The insider information refers to the information that is not disclosed, directly or indirectly related to one or more encrypted assets or issuers. If this information is public, it may have a significant impact on the prices of these encrypted assets.

(2) Forbidden insider trading:

• Those who hold inside information shall not use this information to buy and sell encrypted assets, and cannot recommend or seduce others to conduct insider transactions.The insider information holder cannot disclose this information to others unless it is disclosed within a normal occupation or position.

(3) Punishment measures:

• If the insider trading behavior is found, the relevant agencies have the right to investigate individuals or companies involved, and punish them according to regulations, including fines, banned business, etc.

2. Market manipulation prevention

(1) Definition of market manipulation:

Market manipulation includes but not limited to the following behavior:

• Creating false supply and demand signals affects the price of encrypted assets.

• Manipulate encrypted asset prices through false transactions and false information dissemination.

• Utilize the market status, directly or indirectly fix the price of sale and sell, or create unfair trading conditions.

(2) Typical market manipulation behavior:

• For example, through the normal operation of a large number of buyers to disrupt the trading platform, it has created a false market trend.

• Passionate or misleading information in the media or the Internet affects the price of encrypted assets.

• Use its dominant position in the market to directly or indirectly manipulate the price of encrypted assets.

3. Prevention and detection mechanism

(1) Prevention measures:

• Crypto asset service providers need to establish an effective internal control system to prevent market manipulation.These systems include monitoring trading activities, detecting abnormal trading behaviors, etc.

(2) Detection and report:

• After the service provider finds suspicious transactions, it should immediately report to the competent department.These reports need to include all relevant information, such as trading orders and the operation of the trading platform.

• The European Securities and Market Administration (ESMA) will formulate technical standards to help service providers better fulfill these prevention and testing obligations.

(3) Cross -border cooperation:

• For the manipulation of multinational markets, the competent departments of relevant countries need to coordinate and cooperate to jointly crack down on market abuse.

6. Claims of penalties for violations

1. Administrative punishment and other administrative measures

(1) Scope of illegal behavior:

• The regulations have clearly listed illegal acts that need to be punished, including the prohibition clauses that fail to publish information in accordance with the regulations, the prohibition of market manipulation and insider trading, and do not cooperate with the investigation.

(2) Punishment measures:

• Public statement: The competent authority can issue a statement explaining the company or individuals who violate the rules, as well as their violations.This is equivalent to “name criticism” in the market.

• Rectification order: required illegal to stop illegal acts and take measures to prevent again.This is similar to letting the offenders “correct the mistake immediately.”

• Fined fines: The fines (individuals) and legal person (company) are fined, and the amount of fine is calculated based on the severity of the violations and the illegal interest obtained.For example:

• Personal fines can reach up to 700,000 euros.

• The company’s fine up to 5 million euros, or 5%of its annual turnover.

(3) Especially serious punishment:

If it is particularly serious violations, such as multiple violations or seriously affect market stability, the competent authority may:

• Temporarily or permanently prohibit relevant managers from continuing to engage in management work related to encrypted assets.

• Cancel or suspend the company’s business license.

2. The announcement of the penalty decision

(1) Open and transparent:

• For each penalty decision, the competent authority must be announced on its official website.This is equivalent to “public notification criticism”, so that all market participants know illegal behavior and handling results.

(2) Protecting privacy:

• In some cases, if the identity of the offenders will cause inappropriate damage or affect the undergoing investigation, the competent authority may choose to anonymous announcement or suspend the announcement of the punishment decision.

3. Implementation of fines and other punishment

(1) Executive fine:

• Fined fines and other penalties need to be implemented in accordance with the legal procedures of the country.If the punishment does not pay the fine, the competent department may be enforced through legal means.

(2) Femant use:

• The fines collected will be included in the EU’s budget for public expenditure.

4. The right to appeal for punishment

(1) Appeals procedure:

• Those who are punished have the right to appeal the penalty decision.This is like a “reasonable appeal”, and they can obtain objections to the court’s penalty decision.

• The applicant has the right to appeal if the application license is rejected or has no results for more than six months.

7. International cooperation and coordination supervision

Through these international cooperation and coordinated regulatory measures, the EU hopes to ensure the consistency and effectiveness of the crypto asset market globally.Through close cooperation with regulatory agencies in other countries and information sharing, it can better prevent and crack down on multinational violations

1. Cooperation between regulators

(1) Internal cooperation within the European Union:

• Regulators of various countries need to cooperate closely to ensure that the supervision standards of encrypted assets are consistent.This is like the traffic police in different countries need to cooperate with each other to ensure that multinational drivers follow the same traffic rules.

(2) Information sharing:

• Regulatory agencies in various countries must share information in a timely manner, especially when discovering illegal acts or need to investigate.This is like the police station needs to quickly pass the information about the suspect in order to take action in time.

2. Cooperation with non -EU countries

(1) Cooperate with regulatory agencies in non -EU countries:

• Regulatory agencies of EU member states need to sign a cooperation agreement with regulatory agencies in non -EU countries in order to exchange information and joint law enforcement.This can ensure that even cross -border crypto asset transactions can be effectively supervised, just like international police cooperation to combat transnational crimes.

(2) Safety of information exchange:

• These cooperation agreements must ensure the confidentiality and security of information exchange to prevent sensitive information from leaking or abuse.It is like police in different countries when sharing information, ensuring that these information will not be obtained by terrorists or criminals.

3. The role of the European Securities and Market Administration (ESMA) and the European Banking Authority (EBA)

(1) Coordination and promotion cooperation:

• ESMA and EBA are responsible for coordinating the cooperation between regulatory agencies of EU countries and formulating standardized cooperation agreements and information exchange procedures.It is like the International Organization (Interpol) coordinated between police officers to ensure that everyone works in accordance with the same standards and procedures.

(2) Formulate technical standards:

• ESMA and EBA will formulate technical standards to ensure that the formats and contents of information exchange are consistent, facilitating the use of regulators in various countries.This is like formulating a unified language so that police from different countries can understand and use shared information.

4. Treatment of cross -border issues

(1) Transnational investigation and supervision:

• When dealing with multinational crypto assets violations, regulators of relevant countries need to jointly investigate and supervise.This is similar to the joint operation of police in many countries to arrest transnational criminal gangs.

(2) Solve the problem of cooperation:

• If a country’s regulatory agency refuses to cooperate or does not respond to the information request in a timely manner, other countries can report the problem to ESMA or EBA, and they will be coordinated and resolved.This is like submitting the problem to the International Interpol Organization, asking them to coordinate and solve them.

8. The impact of the MICA Act may bring

Impact 1: Remove the Privacy of Privacy

Crypto assets with built -in anonymous functions (such as Monero, ZCASH and other “privacy currency”) can be allowed to enter the trading platform only when CASP or related regulators can identify token holders and their transaction history.Because this cannot be realized in fact, the EU’s cryptocurrency exchanges are expected to be removed from their products.

Impact 2:CASP, which has obtained relevant European licenses, will be easier to get Mica’s license

CASP, which has obtained licenses based on the national framework, will benefit from the simplified MICA authorization program, and has a final MICA license for up to 18 months.For example, German regulatory encryption custodians may benefit from these simplified procedures and transitional measures.However, only Mica’s CASP will have the opportunity to provide services in the entire EU’s single market through the so -called cross -regional license.This is why most cryptocurrency companies are expected to apply for MICA authorization as soon as possible.

Impact 3: UnificationEuropean market

MICA regulations will bring unified supervision, enhance competitiveness, and promote institutional development.So far, if the EU’s encryption companies want to serve the entire EU market, they must apply to the regulatory agencies of each country, resulting in high and cumbersome costs.Under MICA, the same binding EU requires that it will apply to all 27 member states.Once a company obtains MICA license in a country, it will be able to provide licenses in the single market throughout the European Union through the “cross -zone permit”.

Impact 4: offshore companyIt will be restricted, EU companies benefit

After MICA takes effect, offshore, unsure regulatory companies will not be able to actively attract EU customers.Even if foreign companies can accept the rules of customers under the initiative of EU users, they will become more stringent.This means that the MICA -supervised encryption companies will grab more EU market share from these unmarried overseas competitors.

Impact 5: MICA promotes participation, European banks accelerate the layout

MICA may lead to the use and increase in activities in the EU encryption market.According to Bloomberg’s data, only 4% of European institutions have exposed funds to encryption assets.Regulatory uncertainty is one of the main concerns to prevent institutions from entering this field.It is expected that in the next 48 months, major European banks will launch crypto asset services, whether custody, transactions, or electronic currency tokens or asset reference tokens issuance.

Impact 6:The impact of MICA on stable currency issuers

Mica’s new regulatory rules will bring major compliance challenges to stable currency issuers represented by Tether, especially considering that Tether has not fully disclosed its reserve status and composition, and has not accepted comprehensive audit of authoritative independent institutions.EssenceTether has also been involved in multiple litigation and investigations, including reaching a settlement of $ 18.5 million with the Office of the New York State Attorney General, as well as rumors of the US Department of Justice to investigate suspected bank fraud, money laundering and illegal operations.In the future, stable currency issuers represented by Tether will face greater compliance reform costs.

In order to cope with these challenges, Tether should actively promote its own compliance process and establish a good cooperative relationship with EU regulators and third -party audit institutions to improve their market reputation and competitiveness.Faced with increasingly stringent regulatory requirements, Tether has taken measures to advance the compliance process.For example, Tether recently announced that it will cooperate with the Italian branch of BDO International, BDO International, the fifth largest accounting firm in the world.per month.

Under the framework of MICA, stable currency issuance will become more compliant and transparent.Tether and other stable currency issuers need to accelerate the compliance process to adapt to the new regulatory environment and maintain competitiveness in the EU market.

Impact 7:MICA pairDefiInfluence

MICA is suitable for enterprises -natural and legal persons, as well as “some other companies”.”Other companies” may include entities that have not been established in accordance with the law, but the European Union has clarified that decentralized DAOs and agreements are not new goals this time.MICA clarifies the 22nd paragraph, “If the encrypted asset service is provided in a completely decentralized manner, no intermediary should be within the scope of this regulation.” This core statement has been repeatedly disclosed by the European Commission and key officials of the parliament.Declaration support.

However, the details determine the success or failure.The bill proposes that even if some activities or services are performed in a decentralized manner, MICA may be applicable.This means that if some parts or links in the DEFI project are not completely decentralized, it may still need to comply with the relevant regulations of MICA.

How much decentralization (technical, governance, law, etc.) is needed to not be within the scope?It is not an ambiguous subjective judgment.I expect some law enforcement and litigation cases to focus on this issue.The European Union is usually not willing to enforce their laws in other countries, but if some DEFI projects are nominally decentralized, but they are actually centralized.Special attention.

If the DEFI project wants to have two options within the scope:

• Proof is completely decentralized (high threshold)

• Blocked EU users

However, when the European Union formulates regulations on traditional financial companies, it is worthy of commendation to exclude real decentralized DEFI projects.If some Mica’s content can become a global standard, it will be good news.

Impact 8:Challenge and uncertainty

However, the actual success of MICA depends on the implementation standards and law enforcement practices formulated by the European Union regulators within the next 12-18 months.Some clauses may have a burden on industry participants, and its entire impact will only appear after providing practical operation guidelines in the technical implementation standards.

Impact 9:High -convergence costs and innovations are blocked

Like the recent situation in Hong Kong, the cost of compliance is too high, and the company’s fled, and the compliance cost of MICA will also make the stable coin issuer bypassed the EU.Benefits make its products lack competitiveness compared to offshore competitors.EU consumers are either cut off and innovated, or continue to use (and expose) the largest offshore liquidity and practical pool.In addition, regulators may think that most NFT and DEFI projects are actually within the range of MICA and need to be observed -this is a door that is still open to interpretation of the current MICA preface.This will inevitably lead to teams and resources out of the European Union.

Can the MICA Act become a global standard?

MICA is expected to become GDPR in the field of cryptocurrencies, that is, regulatory standards widely adopted globally, but this has not yet been fixed.

It is undeniable that MICA has a significant impact on its encrypted asset framework in other jurisdictions, especially those with insufficient financial supervision and supervision experience.In the recent financial stability committee (FSB), many concepts have been inspired by MICA in the proposal of encrypted service providers and “Global Stabilization Coins Arrangement”.

The EU market is the largest internal market in the world with 450 million relatively wealthy consumers.With its market size, MICA will promote many companies around the world to adopt MICA’s operating standards, and may even adapt internationally to maintain global operations and products consistency.The global impact of EU regulatory standards in multiple industries has been observed. From chemical industry to agriculture to technology. This phenomenon has been called “Brussels Effect” by Anu Bradford, a professor of Columbia Law School.

Caroline Pham, a member of the current American Commodity Futures Trading Commission (CFTC), warned: “As the United States struggles in providing regulatory clarity in the domestic encryption industry, the global regulatory framework like Mica may fill this gap.”

With the continuity of the US -encrypted asset regulatory vacuum, the global influence of MICA standards is expected to increase.

However, the actual success of MICA is the key, and most of the actual implementation work is still ahead.If MICA is proven to be feasible for industry, consumers and regulators, it will have a global impact.Otherwise, many jurisdictions may choose completely different policy paths.Only time and market can tell us the answer.

After the FTX completely collapsed, even the most firm cryptocurrency extremists had to admit that a reasonable supervision of some form of formation was needed to promote the development of the field and prevent the most serious fraud.