Have you heard of or even experienced a pump and dump scheme? Have you invested in a coin that within a few weeks was no longer available to trade and lost all the money invested in this coin? 

Practices like these create a negative image and raise suspicion on the crypto market. Retail investors currently have little protection against these types of schemes. The European Union has identified the matter and started working on a suitable solution called MICA. With it, crypto service providers will be under supervision. 

We asked Petra Boonstra, Our Diamond Pigs Legal Advisor, to share with us the latest news on MICA (Markets in Crypto-assets) in the EU countries.

What is  MICA?

MICA stands for “Market in Crypto Assets”. It is a European regulation. It applies directly to all Member States when it enters into force.

MiCA is part of the Digital Finance package prepared by the European Commission. The package contains measures that aim to create room for digitization of European financial services and the aim of limiting risks for consumers & the financial markets.

MICA was established following advice from the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), in which they described that existing EU legislation did not align well with the use of crypto. There were no rules regarding consumer protection, market forces, innovation and sustainability. The European Commissions and the Council were thus determined to create a framework to regulate the crypto market..

Goals of the MICA

Provide legal certainty

specifying the regulations regarding crypto assets, which are not covered by existing legislation on financial services.

Supporting innovation

By designing a  secure and proportionate framework which allows innovation and fair competition.

Consumer and Investor Protection and Market Integrity

So that Crypto investors  which are not subject to existing financial services legislation are protected against the same risks as more trusted financial instruments.

Ensuring financial stability

Crypto-assets are constantly evolving. Some are quite limited in scope and use, while others, such as the emerging category of stablecoins, have the potential to become widely accepted and potentially systemically important. The proposal contains safeguards against potential risks posed by stablecoins to financial stability and controlled monetary policy.

What does this mean for crypto traders?

This European regulation is only for crypto service providers, not for  ordinary people who trade. So it applies only if organisations commercialise their crypto assets and add services that automatically provide protection for consumers who invested via a crypto provider as those entities will be obliged to comply with the MICA framework.

When will the MICA be applied?

The timeline is still uncertain. They expect it to be finished and come into effect by the end of this year, but discussions are ongoing. When it goes through, every company has 8 months to apply for the permit.  However, it will already apply to every Member State from its entry into force.

The MiCA is expected to enter into force in Q3 or Q4 of 2022. Subsequently, all member states will have 18 months to do all the preparation required to comply with the regulations.


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