The scope of application of the Markets in Crypto-assets Regulation

In April 2023, the Markets in Crypto-assets Regulation (MiCAR) was ratified becoming the first regulatory framework for crypto-assets with the strategic goals of protecting consumers, investors and market integrity; ensuring financial stability; and supporting innovation. Thus, MiCAR sets out several rules for crypto-assets players, namely for issuers and Crypto-assets Service Providers (CASP).

In this context, it is therefore relevant to determine MiCAR’s scope of application, specifically, to whom does MiCAR apply; what kind of assets are covered by MiCAR; and which activities or services are included in MiCAR. In addition, what is excluded, either directly or indirectly, by MiCAR is also relevant.

To whom does MiCAR apply?

The regulation is clear in this respect stating that it is applicable to issuers of crypto-assets and to CASPs engaged in the issuance, offers to the public and admission in the trading of crypto-assets or issuers providing services related to crypto-assets in the Union.

What kind of assets does MiCAR cover?

As for the second question, the regulation refers to three different types of crypto-assets covered by the new regulation:

Asset-referenced token a crypto-asset that purports to maintain a stable value by referring to another value or right or a combination thereof, including one or more fiat currencies, and is not an electronic money token (paragraph 6, no.1 of article 3 of MiCAR);

Electronic money token a crypto-asset with the main purpose to serve as a means of exchange and one that purports to maintain a stable value by referring to the value of a fiat currency (paragraph 7, no.1 of article 3 of MiCAR);

Utility token a crypto-asset that is only intended to provide digital access to a good or service supplied by its issuer (paragraph 9, no.1 of article 3 of MiCAR).

Which activities/services are included in MiCAR?

MiCAR specifically provides a list of crypto-assets services the custody and administration of crypto-assets on behalf of clients; the operation of a trading platform for crypto-assets; the exchange of crypto-assets for banknotes and coins, scriptural money or electronic money; the exchange of crypto-assets for other crypto-assets; the execution of orders for crypto-assets on behalf of clients; the placing of crypto-assets; the reception and transmission of orders for crypto-assets on behalf of clients; providing advice on crypto-assets; providing portfolio management on crypto-assets; and providing transfer services for crypto-assets on behalf of clients.

What is excluded from MiCAR?

On one hand, MiCAR expressly excludes from its scope of application any crypto-assets that are unique and not fungible with other crypto-assets. MiCAR also lists the following assets excluded from its regulation:

• Financial instruments;
• Deposits, including structured deposits;
• Funds, except if they qualify as e-money tokens;
• Securitisation positions in the context of a securitisation;
• Non-life or life insurance products falling within certain classes of insurance or reinsurance and retrocession contracts;
• Pension products that, under national law, are recognised as having the primary purpose of providing the investor with an income in retirement and that entitle the investor to certain benefits;
• Officially recognised occupational pension schemes;
• Individual pension products for which a financial contribution from the employer is required by national law and where the employer or the employee has no choice about the pension product or provider;
• A pan-European Personal Pension Product;
• Social security schemes.

Border situations

Although MiCAR brought certainty about the entities and services covered by the new regulation, it may prove difficult to assess whether a crypto-asset should be considered covered by MiCAR. A possible solution lies on the crypto-asset features, such as its fungibility or uniqueness. If a crypto-asset is unique and non-fungible it will be out of MiCAR’s scope of application.

For more information on the application of MiCAR, contact your CMS client partner or local CMS experts: Gonçalo Moncada, Margarida Vila Franca and Filipe Casqueiro who worked on the article on behalf of the CMS Crypto team, 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.