What is the MiCA Regulation?

On December 30, 2024, the MiCA Regulation will come into full effect within the EU. MiCA stands for Markets in Crypto Assets and is a harmonized regulation at EU level for crypto assets and the crypto market. This regulation has been long-awaited and worked on for several years at EU level. For the first time ever, it establishes a dedicated regulatory framework for crypto assets in the EU.

In most emerging industries, innovation tends to advance faster than regulations, which is not always a good thing. Regulations are needed for an industry, such as the crypto market, to mature and establish itself more widely. Clear rules and frameworks for all market participants and end consumers aim to prevent all forms of market manipulation, corruption, and most importantly, to protect the end consumer.

In most EU countries, there has been a lack of crypto regulations, including in Sweden, where anti-money laundering and currency exchange laws have been applied to the crypto market. These are older laws not adapted to this innovative technology—blockchain technology and crypto assets. The absence of a regulatory framework can hinder innovation and the growth of crypto assets, as there are no clear directives for both market actors and supervisory authorities to follow.

Therefore, many market participants in the crypto industry, including Virtune, welcome this regulation and believe it will contribute to a more mature crypto market with the right conditions for crypto adoption to accelerate, while unprofessional actors can be prevented from establishing or continuing their operations.

So, what does MiCA mean for the crypto market in the EU?

The overall goal of the MiCA Regulation is to harness the beneficial effects of crypto assets on financial markets while identifying and counteracting potential threats to financial stability.

A crypto asset is defined, in accordance with previous international agreements, as a digital representation of a value or a right that can be transferred and stored electronically without the need for a central party or intermediary, often using blockchain technology. The regulation particularly highlights two categories of crypto assets: asset-referenced tokens and e-money tokens.

An e-money token, often called a stablecoin, is a crypto asset whose value is linked to a traditional currency, such as SEK or USD. An asset-referenced token, on the other hand, is a crypto asset that does not qualify as an e-money token but still aims for stable value by linking to other assets, rights, or combinations of these.

In addition to these types, MiCA also covers other forms of crypto assets. For example, well-known crypto assets like Bitcoin and Ethereum do not fall under either e-money tokens or asset-referenced tokens.

The regulation imposes requirements on how offerings and marketing of crypto assets should be conducted. For instance, a white paper must be prepared, similar to a company prospectus before a stock market listing. The white paper must disclose the crypto asset's features, technical aspects, economic models, and risks. Furthermore, issuers of asset-referenced tokens must obtain authorization, while issuers of e-money tokens need approval as either a credit institution or an electronic money institution. The MiCA Regulation also includes rules to prevent market abuse.

The MiCA Regulation consists of several comprehensive rules, including for crypto companies providing crypto-asset services such as crypto exchanges, issuance of digital wallets, and other trading services. These regulations will impose additional requirements on market participants, including security measures for storing customers' assets and measures to prevent money laundering and terrorist financing. Companies providing crypto-asset services must apply for a CASP license, which stands for Crypto-asset Service Provider.

What does this mean for Virtune's products?

Virtune's exchange-traded products, securities with underlying assets as collateral traded on regulated markets, operate within the framework of existing securities laws and are overseen by the European Securities and Markets Authority (ESMA). Therefore, Virtune's products are not affected or regulated directly by the MiCA Regulation.

Virtune's view on the crypto market and upcoming regulations

At Virtune, we see great potential in crypto assets and their emerging role in society and the economy. We strongly believe that regulations through the MiCA Regulation will, over time, lead to a better and more mature crypto market, combined with higher consumer protection and increased acceptance from financial institutions. Now that a clear regulatory framework is in place, this will benefit the growth of crypto assets rather than hinder it in the Swedish market.

At Virtune, we look forward to accelerating our efforts to educate the Swedish market about crypto assets and to continue developing transparent, secure, and regulated exchange-traded products that make it easy for investors to invest in this innovative market.

Do you have questions about MiCA, our products, or the Swedish crypto market? Feel free to contact us at hello@virtune.com.

Cryptocurrency investments are associated with high risk. Virtune does not provide investment advice. Investments are made at your own risk. Securities may increase or decrease in value, and there is no guarantee that you will recover your invested capital. Please read the prospectus, KID, terms at www.virtune.com.