With the Cryptoasset Market Regulation (Mica) is about to2024Year6moon30Effective today, major cryptocurrency exchanges such asBinance、KrakenandOKXis considering delisting it from its European platformTetherofUSDT. Binance (Binance) announced that it will beMicaAfter taking effect, users in the European Economic Area will be restricted from using unauthorized stablecoins, and users will be gradually guided to use regulated stablecoins. While existing unlicensed stablecoins will not be delisted, they will be set to “sell only” mode to allow users to convert to Bitcoin, regulated stablecoins, or fiat currencies.

At the same time, member states are adapting their laws and regulatory frameworks to comply withMicastandard. Some countries have begun toMicatraining regulators on their implementation and establishing the technical infrastructure to support enforcement of new regulations.

European UnionMicaAct, most of the provisions start from2024Year12moon30It will be implemented on 1st, and some special provisions will be implemented in advance.2024Year6moon30Japan, there are also technical provisions since2023Year6moon29Effective from date. This phased implementation arrangement is designed to ensure that the market has sufficient time to prepare and adjust, ensuring a smooth transition and orderly development of the crypto asset market. (In phases, the period is12arrive18months). As shown below:

The bill mainly covers the following main contents:

• Transparency and disclosure requirements for cryptoassets when they are issued, made available to the public and traded on trading platforms;
• Authorization and oversight requirements for cryptoasset service providers, asset reference token issuers and electronic currency token issuers, as well as their operational, organizational and governance requirements;
• Requirements for the protection of holders when cryptoassets are issued, made available to the public, and traded;
• Protection requirements for cryptoasset service provider customers;
• Measures taken to prevent insider trading, illegal disclosure of inside information and market manipulation to ensure the integrity of crypto asset markets.

AiyingAiying will analyze it through nine modulesMicabill:

• Definition and scope of application of the Act
• Transparency and disclosure requirements for cryptocurrency project offerings
• License application and obligations
• Measures required to protect the rights and interests of investors and customers
• Prevention of insider trading and market manipulation requirements
• Violation penalties
• International cooperation and coordinated supervision
• The possible impact of the Mica bill
• Can Bill Mica become a global standard?

1. Definition and scope of application of the Act

1. EuropeMicaDefinitions related to the Act:

Here is a supplement to the Cryptoasset Market Regulations (MiCA) on Asset Reference Tokens (ARTs) and Electronic Money Tokens (EMTs),Cryptoasset service provider (CASP, Crypto-asset Service Providers)Specific dollar amounts and other related requirements are set. The following are the specific amounts and requirements:

(1) Asset Reference Tokens (ARTs)

ARTs are stablecoins whose value is pegged to multiple currencies, commodities, or other cryptoassets. MiCA’s specific requirements for ARTs include:

• Reserve Requirements: IssueARTsThe company must hold sufficient reserves to ensure the stability of the token. The reserve should equal or exceed the total value of issued tokens.
• Amount limit:singleARTThe daily trading volume shall not exceed5million euros. ifARTmarket value exceeds5billion euros, issuing companies are required to report to regulators and take additional compliance measures.
• Transparency and reporting: Issuing companies are required to regularly disclose reserve details and financial statements to ensure transparency. Token issuance and reserve status are reported to regulators monthly.

(2) Electronic Money Tokens (EMTs)

EMTs are stablecoins whose value is pegged to a single fiat currency. MiCA’s specific requirements for EMTs include:

Reserve Requirements: IssueEMTsThe company must hold an equivalent amount of fiat currency reserves to ensure the stability of the token. The reserve should equal or exceed the total value of issued tokens.

Amount limit:singleEMTThe daily trading volume shall not exceed5million euros. ifEMTmarket value exceeds5billion euros, issuing companies are required to report to regulators and take additional compliance measures.

(3) Crypto-asset Service Providers (CASP, Crypto-asset Service Providers)

Need to comply with plans regarding its governance, asset custody, complaints handling, outsourcing, liquidation (wind-down plans), information disclosure and, most importantly, minimum prudential requirements.——CASPs A permanent minimum capital is required to be maintained (“own funds”):

• The trading platform is required to maintain a minimum permanent capital (“own capital”) of €150,000
• Custodians and exchanges (brokers) require €125,000
• All other CASPs require €50,000

1. Scope of application

2. Encryption project issuance transparency and disclosure requirements

The EU Crypto-Asset Market Regulation (EU) 2023/1114 in terms of transparency and disclosure requirements ensures that through detailed white paper writing and publishing processes, strict information update requirements, and standardized marketing materials,The market transparency of project issuance protects the rights and interests of investors. The following are the project issuance requirements details:

3. License application and obligations

1, license application

（1) Application qualifications:

• Only companies that meet certain conditions can apply for and obtain a cryptoasset services license. This includes that the company must have a sound legal structure, good financial status, and a reliable management team.
• For example, a company must be a legal entity or other legal form of business.

（2), application documents:

• Companies need to submit a series of documents when applying for a license, including:
• Company name, legal entity identifier, website, contact information and physical address.
• The legal form and articles of association of the company.
• A detailed operating plan describing the types of cryptoasset services planned to be provided and how and where they will be marketed.
• Documents proving that the applicant meets the prudential safeguard requirements.
• A description of the company’s governance structure, including background check reports on management members to ensure they are reputable and have the knowledge and experience to manage the company.
• Information on the identities of major shareholders or members and their shareholdings, and ensuring that these individuals are in good standing.
• Description of internal control mechanisms, risk management procedures, anti-money laundering and counter-terrorism financing measures, and business continuity plans.
• Technical documentation of information and communications technology (ICT) systems and security arrangements.
• Description of procedures for segregating client assets and funds.
• A description of the customer complaints handling procedure.

（3), review process:

• After receiving the complete application materials, the competent authority must review and make a decision within a specified period.
• Once authorization is obtained, it is necessary to clarify the types of services that the cryptoasset service provider is authorized to provide.
• Authorization information needs to be notified to the European Securities and Markets Authority (ESMA) and recorded in a public registry.

1. Obligations of license holders

（1) Compliance operations:

• Companies that obtain licenses must continue to meet the authorization conditions and regularly report their operations to the competent authorities.
• Companies need to maintain sound internal control mechanisms and risk management procedures to ensure that their operations are compliant and safe.

（2) Cross-border services:

• Companies that obtain a license can provide services within the EU without setting up a physical office in each member state, but they are required to notify and provide relevant information to the competent authorities of the destination member state.

（3) Manage change and business expansion:

• If a company’s management changes, the competent authorities must be notified immediately and provided with all necessary information to assess compliance.
• If the company wants to add new service types, it needs to apply for an extended license from the competent authority and supplement and update relevant information.

（4) Regular supervision and inspection:

• Competent authorities have the authority to conduct on-site inspections and request any information relevant to operations to ensure companies continue to comply.
• Companies are required to cooperate with inspections by competent authorities and provide all necessary operational information and data.

（5) Violation handling:

• Competent authorities may revoke a company’s license under certain circumstances, including but not limited to:
• Not used within 12 months after authorization.
• No crypto asset services have been provided for 9 consecutive months.
• Authorization was obtained through improper means.
• Failure to comply with authorization conditions and failure to take remedial measures within the prescribed period.
• Serious breaches of regulations, including breaches of customer protection and market integrity regulations.

4. Measures and requirements to protect the rights and interests of investors and customers

1. Protection of investors’ rights and interests

（1) Information transparency:

• Companies that issue crypto assets must provide detailed and accurate information so that investors know what they are buying and what the risks and benefits are.
• This information includes company details, technical details of crypto assets, trading and distribution methods, potential risks, and more.

（2) Treat fairly:

• The company must ensure that all investors are treated fairly during the transaction process without any form of discrimination.
• If there is special treatment, it must be clearly stated in white papers and marketing materials to ensure transparency and fairness.

（3)Risk Disclosure:

• Companies must fully explain all possible risks, including technical risks, market risks and legal risks, so that investors can understand the risks of investment.

1. Protection of customer funds

（1) Independent hosting:

• The company must manage customers’ funds and the company’s funds separately to ensure the safety of customers’ funds.
• This is done to prevent the company from misappropriating customer funds and to protect customers’ interests if something goes wrong with the company.

（2) Compensation mechanism:

• If there is a problem or breach of contract by the company, there must be a clear compensation and compensation mechanism to ensure that customers can receive compensation in a timely manner.
• Companies need to have adequate resources and arrangements in place to make indemnification.

(3) Transparent pricing:

• Companies must disclose all charges and fees to ensure customers know the details of each charge.
• This information should be prominently posted on the company’s website to ensure transparency.

1. Investor suitability assessment

（1)Customer information collection:

• When providing advice to clients or managing client assets, service providers need to collect relevant information about clients, including investment experience, risk tolerance and financial status.
• This information is used to assess whether a crypto asset is suitable for the client and to ensure that recommendations are consistent with the client’s investment objectives and risk appetite.

（2) Risk warning:

• Service providers need to clearly inform customers of the risks associated with crypto-assets, including the risk of value fluctuations, liquidity risks and possible total loss.
• Clients need to understand that crypto assets are not protected by traditional investor compensation schemes and deposit protection schemes.

（3) Periodic evaluation:

• Service providers are required to review their clients’ suitability assessments regularly (at least every two years) to ensure that their advice and services remain
• Aligned with client needs and risk tolerance.

4.Customer complaint handling

（1) Complaint Handling Procedure:

• Companies must have effective complaints handling procedures to ensure that customer complaints are handled promptly and fairly.
• Customers can submit complaints for free, and companies need to provide complaint templates and record all complaints and handling results.

（2) Complaint Transparency:

• Companies must publish details of their complaints handling procedures on their websites to let customers know how their complaints are handled and how they can be resolved.
• The company is required to investigate all complaints within a reasonable time and notify customers of the outcome.

5. Requirements to prevent insider trading and market manipulation

1.Insider trading prevention

（1) Definition of inside information:

• Insider information refers to information that is not public and directly or indirectly related to one or more crypto-assets or issuers, which, if made public, may have a significant impact on the price of these crypto-assets.

（2) Prohibition of Insider Trading:

• Those who hold inside information may not use this information to buy or sell crypto assets, and may not recommend or induce others to engage in insider trading. Holders of inside information cannot disclose such information to others unless the disclosure is within the normal scope of their profession or position.

(3) Punishment measures:

• If insider trading is discovered, relevant agencies have the right to investigate the individuals or companies involved and impose penalties in accordance with laws and regulations, including fines, bans, etc.

1. Prevention of market manipulation

（1) Definition of market manipulation:

Market manipulation includes, but is not limited to, the following behaviors:

• Create false supply and demand signals to affect crypto asset prices.
• Manipulate the price of crypto assets through false transactions, false information dissemination and other means.
• Taking advantage of market position to directly or indirectly fix buying and selling prices or create unfair trading conditions.

(2) Typical market manipulation behaviors:

• For example, disrupting the normal operation of the trading platform through a large number of buy and sell orders and creating false market trends.
• Spreading false or misleading information in the media or the Internet affects the price of crypto assets.
• Use its dominant position in the market to directly or indirectly manipulate the buying and selling prices of crypto assets.

1. Prevention and detection mechanisms

（1) Precautions:

• Cryptoasset service providers need to establish effective internal control systems to prevent market manipulation. These systems include monitoring trading activities, detecting abnormal trading behavior, etc. \

（2) Detection and Reporting:

• When service providers discover suspicious transactions, they should immediately report them to the competent authorities. These reports need to include all relevant information, such as trading orders, operation of the trading platform, etc.
• The European Securities and Markets Authority (ESMA) will develop technical standards to help service providers better fulfill these prevention and detection obligations.

（3) Cross-border cooperation:

• Regarding transnational market manipulation, the competent authorities of relevant countries need to coordinate and cooperate to jointly combat market abuse.

6. Penalties for violations

1. Administrative penalties and other administrative measures

（1) Scope of violations:

• The regulations clearly list violations requiring penalties, including failure to release information in accordance with regulations, failure to comply with prohibitions on market manipulation and insider trading, and failure to cooperate with investigations.

（2) Punishment measures:

• Public Statement: Competent authorities may issue a statement identifying the offending company or individual and their violations. This is equivalent to “naming and criticizing” across the market.
• Corrective Order: Requires the violator to cease the violation and take steps to prevent recurrence. This is akin to telling offenders to “correct immediately.”
• Fines: Fines are imposed on natural persons (individuals) and legal persons (companies). The amount of the fine is calculated based on the seriousness of the violation and the illegal benefits obtained. For example: \
  Fines for individuals can reach up to €700,000. \
  Fines for companies can reach up to €5 million, or 5% of their annual turnover.

（3) particularly severe penalties:

If it is a particularly serious violation, such as multiple violations or a serious impact on market stability, the competent authority may:

• Relevant managers are temporarily or permanently prohibited from continuing to engage in crypto-asset-related management work.
• Revoke or suspend the company’s operating license.

1. Announcement of penalty decisions

（1) Open and transparent:

• For every penalty decision, the competent authority must publish it on its official website. This is equivalent to “public notification of criticism”, letting all market participants know the violations and the consequences.

（2) Protect privacy:

• In certain circumstances, authorities may choose to publish anonymously or withhold publication of disciplinary decisions if publishing the identity of the offender would cause disproportionate harm or affect an ongoing investigation.

1. Implementation of fines and other penalties

（1) Enforcement fines:

• Fines and other penalties must be imposed in accordance with the legal procedures of the host country. If the person being punished fails to pay the fine, the competent authorities can enforce it through legal means.

（2)Purpose of fine：

• Fines collected will go into the EU budget and be used for public spending.

1. Right of appeal against punishment

（1)Appeal Procedure:

• The punished person has the right to appeal the penalty decision. This is like a “founded complaint” where they can challenge the penalty decision through the courts.
• Applicants also have the right to appeal if their application for a license is rejected or if the application is processed for more than six months without a result.

7. International cooperation and coordinated supervision

Through these international cooperation and coordination of regulatory measures, the EU hopes to ensure the regulatory consistency and effectiveness of crypto asset markets on a global scale. Transnational violations can be better prevented and combated through close cooperation and information sharing with regulators in other countries

1. Cooperation among regulatory agencies

（1) Cooperation within the EU:

• Regulators in various countries need to work closely together to ensure consistent regulatory standards for crypto assets. It’s like traffic police from different countries need to cooperate with each other to ensure that cross-border motorists obey the same traffic rules.

（2) Information sharing:

• Regulators in each country must share information in a timely manner, especially when violations are discovered or require investigation. This is like the need for information about suspects to be passed quickly between police stations so that timely action can be taken.

1. Cooperation with non-EU countries

（1) Cooperation with regulatory authorities in non-EU countries:

• Regulators in EU member states are required to enter into cooperation agreements with regulators in non-EU countries to exchange information and jointly enforce the law. This ensures that even cross-border crypto asset transactions can be effectively regulated, much like international police cooperation to combat transnational crime. \

（2) Security of information exchange:

• These cooperation agreements must ensure the confidentiality and security of information exchanged and prevent the disclosure or misuse of sensitive information. This is like when police in different countries share intelligence, they want to ensure that this information will not be obtained by terrorists or criminals.

1. The role of the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA)

（1) to coordinate and promote cooperation:

• ESMA and EBA are responsible for coordinating cooperation among regulatory agencies in EU countries and developing standardized cooperation agreements and information exchange procedures. It is like Interpol, which coordinates operations among police forces in various countries to ensure that everyone operates according to the same standards and procedures.

（2) Develop technical standards:

• ESMA and EBA will develop technical standards to ensure that the format and content of information exchange are consistent and easy to use by regulatory agencies in various countries. It’s like developing a unified language so that police from different countries can understand and use the shared information.

1. Dealing with cross-border issues

（1) Transnational Investigation and Surveillance:

• When dealing with cross-border crypto asset violations, regulatory agencies in relevant countries need to jointly investigate and supervise. This is similar to a joint police operation from multiple countries to arrest transnational criminal gangs.

(2) Solve cooperation problems:

• If one country’s regulator refuses to cooperate or does not respond to requests for information in a timely manner, other countries can escalate the issue to ESMA or EBA, who will coordinate the resolution. This is like submitting the problem to Interpol and asking them to coordinate and solve it.

8. The possible impact of the Mica Act

Impact 1: Privacy coins are removed from the shelves

Crypto-assets with built-in anonymity features (such as “privacy coins” such as Monero, Zcash, etc.) will only be allowed onto trading platforms if CASP or relevant regulatory authorities can identify the token holders and their trading history. Since this is de facto impossible, EU-regulated cryptocurrency exchanges are expected to remove privacy coins from their products.

Impact 2: Those who have obtained relevant European licensesCASPwill be easier to obtainMicalicense

Already licensed under the national frameworkCASPs will benefit from a streamlined MiCA authorization process and have up to 18 months to obtain a final MiCA license. For example, regulated crypto custodians in Germany may benefit from these simplified procedures and transitional measures. However, CASPs licensed only by MiCA will have the opportunity to provide services throughout the EU single market through so-called cross-regional licensing. This is why most cryptocurrency businesses are expected to apply for MiCA authorization as soon as possible.

Impact 3: Unifying the European market

The MiCA regulations will bring unified supervision, enhance competitiveness and promote institutional development. Until now, EU crypto companies had to apply to regulators in each country if they wanted to serve the entire EU market, resulting in high costs and cumbersome processes. Under MiCA, the same binding EU requirements will apply to all 27 member states. Once a company obtains a MiCA license in one country, it will be able to provide licensing services across the EU single market through a “cross-region license”.

Impact 4: Offshore companies will be restricted, benefiting EU companies

Once MiCA comes into effect, offshore, unregulated companies will be unable to proactively attract EU customers. Even the rules under which foreign businesses can take on customers if contacted by EU users will become stricter. This means that crypto companies regulated by MiCA will take more EU market share from these unregulated overseas competitors.

Impact 5: MiCA promotes institutional participation and European banks accelerate their deployment

MiCA may lead to increased institutional adoption and activity in the EU crypto market. According to Bloomberg data, only 4% of European institutional funds are exposed to crypto assets. Regulatory uncertainty is one of the main concerns preventing institutions from entering this space. It is expected that within the next 48 months, major European banks will launch crypto-asset services, whether it is custody, trading, or the issuance of e-money tokens or asset reference tokens.

Impact 6: MiCA’s impact on stablecoin issuers

MiCA’s new regulatory rules will givebyTetherStablecoin issuers represented by poses significant compliance challenges, especially given that Tether has not been able to fully disclose the status and composition of its reserves, nor has it been fully audited by an authoritative independent agency. Tether has also been involved in multiple lawsuits and investigations, including an $18.5 million settlement with the New York State Attorney General’s Office and a rumored investigation by the U.S. Department of Justice into alleged bank fraud, money laundering, and illegal operations. In the future, stablecoin issuers represented by Tether will face greater compliance reform costs.

In order to deal with these challenges, Tether should actively promote its own compliance process and establish good cooperative relations with EU regulatory agencies and third-party audit institutions to improve its market credibility and competitiveness. In the face of 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, the world’s fifth largest accounting firm, which will be responsible for auditing the company’s reserve guarantee and attestation reports, and plans to change the frequency of issuing audit reports from quarterly to per month.

Under the framework of MiCA, stablecoin issuance will become more compliant and transparent. Stablecoin issuers such as Tether need to accelerate compliance processes to adapt to the new regulatory environment and remain competitive in the EU market.

Impact 7: MiCA on Defiinfluence

MiCA applies to businesses – natural and legal persons and “certain other businesses”. “Other businesses” may include entities that are not legally incorporated, but the EU has clarified that decentralized DAOs and protocols are not targeted. Paragraph 22 of MiCA clarifies that “crypto-asset services shall not fall within the scope of this Regulation if they are provided in a fully decentralized manner without the need for any intermediaries.” This core statement has been made public multiple times by key officials from the European Commission and Parliament Statement of support.

However, the devil is in the details. The bill proposes that MiCA may apply even if some activities or services are performed in a decentralized manner. This means that if there are certain parts or links in a DeFi project that are not fully decentralized, they may still need to comply with the relevant regulations of MiCA.

How much decentralization (technical, governance, legal, etc.) is required to stay out of scope? It is an unambiguous subjective judgment. I expect some enforcement and litigation cases will arise around this issue. The EU is generally reluctant to enforce their laws in other countries, but if some DeFi projects are nominally decentralized but are actually centralized and are located in Europe or provide services to EU users, the EU will Special attention.

DeFi projects have two options if they want to be outside the scope:

• Prove complete decentralization (high threshold)
• Block EU users

However, when the EU formulated regulations for traditional financial companies, it considered true decentralizationDeFiProject exclusion is commendable. ifMicaIt would be great news if some of it could become a global standard.

Impact 8: Challenges and Uncertainty

However, the actual success of MiCA is highly dependent on the implementation standards and enforcement practices developed by EU regulators over the next 12-18 months. Some provisions may impose burdens on industry participants, the full impact of which will only be apparent once technical implementation standards provide practical guidance.

Impact 9: High compliance costs and hindered innovation

Like the recent situation in Hong Kong, compliance costs are too high, companies are fleeing, andMicaThe compliance costs ofStablecoin issuers bypass the EU, and exchanges face disclosure requirements and responsibilities that are too onerous to deliver benefits to consumers, making their products less competitive than offshore rivals. EU consumers will either be cut off from innovation or continue to use (and be exposed to) the largest pool of offshore liquidity and utility. Furthermore, regulators may decide that most NFT and DeFi projects are actually within the scope of MiCA and need to comply – a door that the current MiCA preamble remains open to interpretation. This will inevitably lead to the migration of teams and resources outside the EU.

9. Can the Mica Act become a global standard?

Mica Possible to become the leader in cryptocurrency fieldGDPR, that is, a regulatory standard widely adopted around the world, but this is not yet a foregone conclusion.

It is undeniable that MiCA will have a significant impact on their crypto-asset frameworks in other jurisdictions, especially those with less experience in financial regulation and supervision. Many concepts have been inspired by MiCA in recent Financial Stability Board (FSB) recommendations for crypto service providers and the “Global Stablecoin Arrangement.”

The EU market is the largest internal market in the world, with 450 million relatively affluent consumers. Due to its market size, MiCA will prompt many companies around the world to adopt MiCA’s operational standards and possibly even adapt them internationally to maintain consistency in global operations and products. The global impact of EU regulatory standards has been observed across multiple industries, from chemicals to agriculture to technology, a phenomenon that Columbia Law School professor Anu Bradford calls the “Brussels effect.”

Current U.S. Commodity Futures Trading Commission (CFTC) commissioner Caroline Pham warned: “As the United States struggles to provide regulatory clarity for the domestic crypto industry, a global regulatory framework like MiCA may fill this void.”

As the U.S. crypto-asset regulatory vacuum continues, expect the MiCA standard to have growing global influence.

Ultimately, however, MiCA’s practical success is key, and much of the practical implementation work still lies ahead. If MiCA proves viable for industry, consumers and regulators, it will have a global impact. Otherwise, many jurisdictions may choose entirely different policy paths.Only time and the market can tell.

After the complete collapse of FTX, even the most staunch crypto maximalists had to admit that some form of sensible regulation was needed to move the space forward and prevent the worst frauds.

As far as Aiying has been researching bills in various regions and serving customers in the past few years, the MiCA bill should be the most comprehensive crypto-asset regulatory framework we have seen globally. It should be a reference for many other countries and regions. Aiying will continue to pay attention to the updates of the bill, and we will make dynamic updates on the Aiying official website for the latest news.

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Aiying provides comprehensive crypto payment compliance, license subscription, RBA anti-money laundering risk control, fund establishment and a series of compliance solutions related to virtual assets. The team has provided various related services to more than 100 different types of crypto and traditional financial companies, and can provide feasible compliance opinions and solutions at the actual operational level.

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