Building on the CMS series of articles “Legal experts on Markets in Crypto-Assets (MiCA) regulation”, this new article describes the powers of the competent authorities of EU member states, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) under the EU's Markets in Crypto-Assets Regulation (MiCAR). With more than 50 articles and a dedicated Title VII with 5 chapters, MiCAR creates an extensive regulatory framework for both national and EU competent authorities. The following article is a concise summary of the most relevant rules.
1.Powers of competent authorities
Member states will designate their responsible competent authorities to carry out the functions and duties provided for in MiCAR. Where more than one authority is appointed, they must determine their tasks and designate one of them as the single point of contact.
MiCAR determines the minimum supervisory and investigative powers of the competent authorities, which will cooperate and render assistance to the authorities of other member states, the EBA and the ESMA by exchanging information and cooperating in investigations, supervision, and enforcement activities. Two of the more relevant powers are the suspension and prohibition of (i) crypto-asset services, and of (ii) public offers or admission to trading of crypto-assets.
The authority of one member state can request assistance from the competent authority of another member state regarding on-site inspections or investigations, which must be coordinated by the ESMA if requested by a national authority.
Competent authorities must work in close coordination to identify and remedy infringements of MiCAR, develop and promote best practices, facilitate collaboration, foster consistency of interpretation, and provide assessments in case of disagreements.
Further to this, the ESMA and EBA will do the following:
- specify the information to be exchanged between competent authorities;
- establish standard forms, templates and procedures for the cooperation and exchange of information;
- promote discussion on the classification of crypto-assets; and
- identify the sources of potential divergences in the approach to this classification, and promote a common approach.
In some circumstances, the ESMA, EBA and the competent authorities of a member state will be entitled to temporarily prohibit or restrict the marketing, distribution or sale of certain crypto-assets or any practice related to crypto-assets.
2.ESMA register
The ESMA will establish a register of crypto-assets and crypto-asset service providers as well as a register of non-compliant crypto-asset service providers, which will ensure more transparency for holders of crypto-assets across EU.
The crypto-assets register will be made up of:
- crypto-assets white papers (for crypto-assets other than asset-referenced tokens and e-money tokens), which will include all crypto-assets white papers reported to the competent authority as well as any modified crypto-assets white papers;
- all issuers of asset-referenced tokens (including information on the issuer, together with their crypto-assets white papers);
- all issuers of e-money tokens (including information on the issuer, together with their crypto-assets white papers); and
- all crypto-asset service providers (including information on the crypto-asset service providers together with a list of crypto-services provided by the respective entity, a list of countries where services will be provided, the date of their authorisation, etc.).
A non-exhaustive public register of non-compliant crypto-asset service providers will be established for all entities providing crypto-assets services without authorisation. Hence, all entities providing crypto-assets services not authorised by a competent authority and all entities providing crypto-assets services outside the scope of reverse solicitation (i.e. on the client’s own exclusive initiative) will appear on a "shame list" on the ESMA’s website.
The competent authorities will be tasked with the reporting duty whereas the ESMA will be tasked with maintaining both registers, which will be publicly available on the ESMA’s website and will be updated on a regular basis.
3.Penalties
Under MiCAR, the competent authorities will be provided with the power to take appropriate administrative measures (including penalties) for infringements of certain dispositions of the regulation.
Penalties will include public statements identifying the offender, a cease order, fines of up to EUR 700,000 for natural persons, and for legal persons 15% of the total annual turnover or at least twice the amount of the profits gained or losses avoided because of the infringement, even if this figure exceeds the previous caps.
For more information on the role and scope of the authorities enforcing MiCAR, contact your CMS client partner or these CMS experts: Filipe Casqueiro, Ricardo Plasencia, Raquel Lobato, Lucía Medina, Maja Zgajnar and Neža Vončina, or send an email to [email protected].
For other articles in the series “Legal experts on Markets in Crypto-Assets (MiCA) regulation”, click here: Legal experts on Markets in Crypto-Assets (MiCA) regulation (cms.law)
For more information on crypto regulation before the introduction of MiCA, please visit CMS Expert Guide to European Crypto Regulation.
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