Aside the much anticipated Bitcoin halving which apparently, banking on history, is expected to kick-start the next bull run in the cryptocurrency market, another news that, most likely, has caused intense buzz in the crypto market and of course, the blockchain generally in recent times is the Market in Crypto Asset Regulation (MiCAR). Although a regulation formulated, presented and adopted by the European Commission, MiCAR presents a first of its kind proposal of mainstream adoption especially as it stands in favor of specified crypto-asset classes, provides legal backing for businesses surrounding these assets and consumers alike as well as fair market practices.

What is MiCAR?

Market in Crypto Asset Regulation, MiCAR is a unified set of rules, proposed by the European Commission on Market in Crypto-assets and amending directives. These directives make operational provision basically for Crypto-asset Service Providers, Issuers of Asset-referenced Tokens, Issuers of Electronic Money Tokens, and Consumers. The European Commission, through MiCAR is deliberate about ensuring financial stability of crypto-assets among member states by way of regulating public offers, promoting public awareness of the market risks associated with crypto-asset trading.

The proposal for the Market in Crypto Asset regulation as presented 24th September, 2020, is the first comprehensive regulatory framework at the European Union on Crypto-assets. Received its first Approval 20th April, 2023, formalized by the European Council and later Published on the official Journal of the European Union on 9th June, 2023. Although the proposal has received its first and second consultation package publication in the Q3 and Q4 of 2023, it is set to proceed to the third stage of the consultation package publication in Q1 2024 and later into the Application titles later in 2024 according to the MiCA regulation timeline.

Purpose of MiCAR

In general, MiCAR is meant to support mainstream crypto-asset adoption among member states of the European Union. In fact the explanatory Memo puts it, it is part of their “Digital finance package” - to support innovation and a healthy market competition in the digital finance and also doubles as a means to stay relevant in the digital era.

The idea, in part, according to the European Commission President, Ursula Von Der Leyen, and I quote, is a need for “a common approach with member states on cryptocurrencies to ensure we understand how to make the most of the opportunities they create and address the risks they may pose”. This implication is the amendment of related European Union financial rules in line with new innovations so that it does not pose obstacles for the digital financial innovations.

Specifically, there are four major objectives driving the MiCAR - They include:-

Legal Certainty: to proffer a sound legal framework that clearly defines the regulatory treatment of assets that are protected under the regulation and of course those that are not.
To support Innovation: this entails driving awareness and encouraging adoption of crypto-assets and its use. To also ensure fair market competition.
Consumer/Investor Protection: also part of the major objective to ensure integrity among investors and consumers as there are many market options that seem to present related risk factors.
Ensure Financial Stability: coupled with the understanding that some crypto-assets have very limited use cases, while some category of tokens have are inevitable in terms of use, or perhaps are widely acceptable, the commission is poised to mitigate risks associated or that may arise from the use of certain crypto-assets such as Stable coins.

Revolutionary framework of the MiCAR

Technically, the framework of the Market in Crypto Asset regulation covers subjects as it affects

Issuers of specified categories of crypto-assets
Crypto asset service providers
Consumer protection
Fair competition, and
Transparency and disclosure requirements.

In essence, it stipulates authorisation and supervisory rules for crypto-asset service providers, issuers of asset-referenced tokens as well as issuers of electronic money tokens.It mandates them to own a registered office in the European Union member states and also ensure to render the very service (s) for which they registered for.

Secondly, it clearly states the method of operation and governance of crypto-asset service providers, issuers of asset-referenced tokens, and issuers of electronic money tokens. This covers competence by way of having the wealth of experience, qualification and skill. The operational and governance rules also touch on safekeeping of clients’ crypto-assets and funds, proper complaints handling procedures, regulation on outsourcing services as well as the identification, management and disclosure of conflict of interest.

More on the framework is the transparency and disclosure rule governing the issuance and admission of trading crypto-assets. The implication which mandates compulsory publication of whitepapers as well as information contained in the crypto-asset white paper, informing the public about any insider information as it affects them. This they must do through a means that is easy and accessible to the public.

The regulation also informs ideally on consumer protection especially as regards issuance, trading, exchange and custody of crypto-assets.

And lastly the rules guiding against market abuse makes provision for the admission of traders into crypto-assets trading platforms by authorized crypto-asset service providers.