The first draft of euro zone policy known as the Markets in Crypto-Assets Regulation (MiCA) has been proposed. CryptoUK’s Ian Taylor spoke with Sian Jones, senior partner at XReg Consulting, who has experience working with MEPs and helping them to come to terms with the brave new world of digital assets, about MiCA and who it applies to. Jones said,

(2:55) “Well I guess you could at the highest level say pretty much issuers of all manner of tokens, referred to as crypto assets. So that even includes utility tokens, then goes through stablecoins, both of two different categories. Then also beyond that into what are going to be known as crypto asset service providers. So that’s again a broad range of service providers, the ones you might expect, such as exchanges and custodial providers but there’s also a broader range. Really anybody who’s running a market or anyone who is providing a service into the space is going to be caught by this legislation.”

Taylor described the taxonomy of the crypto ecosystem, which includes there are three different categories: payment, utility and security tokens. He asked Jones about the taxonomy under MiCA, in response to which Jones said,

(6:18) “What MiCA does is it says that everything that is already covered under, typically under MiFID, so anything that is a financial instrument…that doesn’t change. So if it’s a security token that meets the criteria for being a financial instrument, that stays exactly the same and you can ignore MiCA. It’s still going to be governed under the existing arrangements. But it says that everything else that’s a crypto asset, we’ve got a pretty broad definition of crypto assets any kind of asset hta is based around DLT. Everything that we know of as a token or coin in the crypto sphere is going to be caught by MiCA. And that includes utility tokens. So there is a base level of requirements that will apply even to issuers of utility tokens. And then it sets a sort of next tier up if you want to think of it like that as stablecoins, which it defines either as asset reference tokens or e-money tokens. And if the asset reference token, they’ll be based on anything other than something that references a single fiat currency…like a euro, for example, that will be deemed an e-money token.”

Taylor asked about Tether’s classification, in response to which Jones explained,

(8:12) “Tether would be, the different forms of Tether would be e-money tokens. Libra’s proposition under the verison two whitepaper where they would be based on single fiat currencies, so they would be classed as e-money tokens. Whereas the version one idea of a basket of tokens, Libra’s sort of version one concept, that would have been an asset reference token.”
Jones added that those stablecoins that the European Banking Authority deems to be significant tokens, whether they are asset reference or e-money tokens, are subject to the most stringent rules. The new rules are expected to come into effect in the next two to three years.