Contribution by Maurizio Antonio Panico, published on N&T Plus Diritto – Il Sole 24 Ore. The European Union has inaugurated an era of regulation in the crypto-assets sector with the Regulation (EU) 2023/1114, known as MiCA. This pioneering regulation introduces a harmonized framework for crypto-assets, aiming to balance innovation and security, protecting consumers while navigating the dynamic digital financial market. The following document provides a concise overview of the categories of crypto-assets involved, details regarding the entry into force of the Regulation, and what is necessary to submit an authorization application as a CASP.

In other words, this document offers a general overview of the new rules of the game, designed to intrigue and inform readers interested in the evolution of crypto-assets under the guidance of MiCA.

Scope of Application

In the context of a rapidly evolving financial landscape, marked by the increasing digitalization of financial services and the emergence of crypto-assets as new frontiers of investment and payment mechanisms, the European Union has taken a decisive step. On 31 May 2023, Regulation (EU) 2023/1114 was adopted, marking the introduction of a harmonized regulatory framework specifically designed for crypto-asset markets within the EU. This legislative move aims to balance the need to promote innovation and competition in the crypto-assets sector with the requirement to ensure a high level of consumer protection and to maintain market integrity.

At the heart of the MiCA regulation lies the introduction of clear requirements for crypto-assets that do not fall within existing financial services legislation, with the aim of mitigating risks for investors, preventing market abuse, and combating financial crime. In particular, MiCA places significant emphasis on three categories of crypto-assets:

• – asset-referenced tokens (so-called: ART),
• – e-money tokens (so-called: EMT), and
• – other forms of crypto-assets.

Thus, it explicitly excludes from its scope of application unique and non-fungible crypto-assets, such as digital art and collectible items, financial instruments, and deposits. In addition to regulating the issuance and offering of such crypto-assets, the regulation also establishes precise obligations for service providers related to them, including, but not limited to, the operation of trading platforms, secure custody of crypto-assets on behalf of third parties, and advisory services, further emphasizing security and transparency in the growing crypto-assets ecosystem.

Entry into Force

Within the scope of Regulation (EU) 2023/1114, precise rules are outlined for the application and transition to the new regulatory framework dedicated to crypto-assets. With specific reference to Article 149.2 of Title IX “Transitional and Final Provisions“, the regulation establishes that most of its provisions will become effective as of 30 December 2024.

However, an early application of Titles III and IV is provided for, concerning respectively asset-referenced tokens (ART) and e-money tokens (EMT), which will be in force as early as 30 June 2024. This temporal distinction reflects the intention to accelerate the adoption of specific rules for these sectors, considered likely to be more sensitive or urgent.

Furthermore, the regulation introduces a provision that allows service providers already active and compliant with national law prior to 30 December 2024 to continue their operations until 1 July 2026. However, Article 143.3 “Transitional Measures” opens the possibility for Member States to modulate this transitional period, either by excluding it or reducing its duration.

In Italy, the legislative choice leans towards a reduction of this transitional period. Based on the scheme of the related legislative decree, service providers that are registered with the Organization of Agents and Brokers (OAM) and that have submitted an authorization application pursuant to Article 62 of the regulation by 30 December 2024, may continue their activity until 1 October 2025. This decision underscores a cautious approach by the Italian legislator, which intends to promote faster adherence to the new regulatory framework. Conversely, those entities that have not submitted an authorization request by the established deadline must cease their operations in Italy as of 30 December 2024 and will be removed from the OAM register. This transition mechanism aims to ensure an orderly and compliant migration to the regulatory regime imposed by MiCA, with a particular focus on investor protection and the integrity of the crypto-assets market.

CASP Authorization Application

To submit an authorization application as a CASP (Crypto-Asset Service Provider), the application must include a comprehensive set of documents and information detailing both the operational and governance structure of the applicant and the regulatory compliance measures to which they adhere.

Pursuant to Article 62 “Application for authorization as a crypto-asset service provider“, here is a breakdown of what must be included:

• The name, including the legal name and any other business name to be used, the legal entity identifier of the applicant crypto-asset service provider, the website managed by such provider, and its physical address.

• The legal form of the applicant crypto-asset service provider.

• The articles of association of the applicant crypto-asset service provider.

• A business plan outlining the types of crypto-asset services that the applicant crypto-asset service provider wishes to provide, including where and how these services will be marketed.

• A description of the governance arrangements of the applicant crypto-asset service provider.

• For all natural persons involved in the management body of the applicant crypto-asset service provider, and for all natural persons who hold, directly or indirectly, 20% or more of the capital or voting rights, proof of the absence of criminal convictions for violations of national regulations in the fields of commercial law, bankruptcy law, financial services law, anti-money laundering law, counter-terrorism legislation, and professional liability obligations.

• The proof that the natural persons involved in the management body of the applicant crypto-asset service provider collectively possess sufficient knowledge, skills, and experience to manage such provider and that these natural persons are required to dedicate sufficient time to the performance of their duties.

• A description of the internal control mechanism of the applicant crypto-asset service provider, the risk assessment procedure and operational continuity plan.

• Descriptions, in both technical and non-technical language, of the IT systems and security arrangements of the applicant crypto-asset service provider.

• The proof that the applicant crypto-asset service provider meets the prudential safeguards.

• A description of the procedures of the applicant crypto-asset service provider for handling customer complaints.

• A description of the procedure for the segregation of crypto-assets and customer funds.

• A description of the procedure and system for detecting market abuse.

• If the applicant crypto-asset service provider intends to provide custody and administration of crypto-assets on behalf of third parties, a description of the custody policy.

• If the applicant crypto-asset service provider intends to operate a crypto-asset trading platform, a description of the operating rules of the trading platform.

• If the applicant crypto-asset service provider intends to exchange crypto-assets for fiat currency or crypto-assets for other crypto-assets, a description of the non-discriminatory trading policy.

• If the applicant crypto-asset service provider intends to execute orders for crypto-assets on behalf of third parties, a description of the execution policy.

• If the applicant intends to receive and transmit orders for crypto-assets on behalf of third parties, proof that the natural persons providing advice on behalf of the applicant crypto-asset service provider possess the knowledge and experience necessary to fulfill their obligations.