The European Commission introduced in September 2020 a proposal for regulation on Markets in Crypto-Assets (MiCA) as part of their digital finance strategy.

Commenting on MiCA Denelle Dixon, Stellar Development Foundation:  “With MiCA moving ahead, this is the first major crypto legislation we’ve seen — and it’s the EU leading on the regulatory frameworks that will likely play a role in setting the tone for the rest of the world.

It’s far from perfect but it provides some clarity this sector needs to move forward in a way that will foster innovation and competition. That’s an important outcome for which we’ve been strong advocates.

The EU is setting high standards for stable coins. And some of the regulations may prove burdensome for actors in the industry, but at least they’ll know where they stand.

I hope the United States follows suit and codifies standards for stable coins this year not only to foster innovation but to maintain our position as leaders of financial innovation.”

MiCA is applicable directly across the European Union (EU).  There is no need for any national implementation laws to enforce MiCA. This approach is deemed important to keep up with consumer protection to ensure effective and harmonised access to the innovative crypto-asset markets across the single market.

MiCA is a lot similar to the (MiFID) Europe’s Markets in Financial Instruments Directive, which is a legal framework for securities markets, investment intermediaries and trading venues

MiCA provides legal certainty around crypto assets like cryptocurrencies, security tokens and stable coins.

MiCA as a digital finance agreement is the tool of European crypto assets regulation.  Thus, the New rules in the European Union will require cryptocurrency businesses to operate with a license.  It mandates that stable coin issuers hold reserves like that which banks have.  MiCA is therefore considered to be a landmark effort by the bloc to regulate the chaotic cryptocurrency sector.

The aim of the MiCA Regulation is to provide for a regulatory framework for the crypto-asset market focused on innovation to harnesses the complete potential of crypto-assets in a way which preserves financial stability to protects investors.

MiCA focuses on regulating crypto-assets that are not covered as financial instruments by the 2nd Markets in Financial Instruments Directive (MiFID II). Whether or not it is applicable is based on the content of an instrument and not actually on the technology which is used to issue it (‘substance over form’).