AFME welcomes agreement on the Markets in Crypto Assets Proposal(MiCA)
01 July 2022
MiCA is an ambitious legislative proposal to create EU-wide minimum requirements for all crypto-assets issuers and service providers. This will bring regulatory certainty, reduce fragmentation and underpin the development of a robust and well-functioning market.
Commenting on the provisional interinstitutional agreement on the
Markets in Crypto Assets Proposal (MiCA) reached between the French
Presidency of the Council of the European Union and the European
Parliament, James Kemp, Managing Director at the Association for Financial Markets in Europe (AFME), said:
“In particular, AFME welcomes the pragmatic approach taken to include
decentralised autonomous organisations (DAOs) and non-fungible tokens
(NFTs). This is a positive development that will future-proof the EU’s
regulatory framework and help it to evolve to meet the challenges
presented in this rapidly evolving space, while maintaining alignment
with existing EU standards and guidelines.
“Amid rapid technological change and significant market innovations, the
rationale for MiCA has become more important than ever for the EU.
Despite the fact a provisional agreement has been reached, the
completion of MiCA will still take several years due to the Regulatory
Technical Standards (RTSs) underpinning the legislation.
“As MiCA is finalised, AFME continues to advocate for further legal
certainty on the requirements imposed on custodians of crypto assets,
and, in particular, to clarify the difference between liability in cases
of negligence and misconduct, and extraneous events (such as a nation
state hack), which may be beyond a custodian’s control. The final
provisions on liability should ensure that a proportionate and balanced
approach is adopted.
“Going forward, it is crucial that MiCA takes into account the broad
global context of digitisation, ensuring that the EU remains open to
global sources of innovation, standards and markets.”
Specifically, AFME:
- Stresses that further clarity should be provided for custodial
liability arrangements. A balanced and proportionate approach to
assessing liability is key to ensure customers and clients are not
driven towards unregulated solutions or self-custody, ultimately putting
them at greater risk of loss, and reducing the ability for authorities
to monitor and mitigate financial crime. AFME believes additional
language is required to clarify what is “attributable” to custodians
(i.e., losses caused by ‘wilful misconduct or gross negligence’) to
ensure alignment with the service standards applicable to traditional
assets.
- Welcomes the fact that the provisions for Decentralised Autonomous
Organisations (DAOs) have become more proportionate and risk-based. The
proposed overall exclusion of so-called “decentralised activities”
risked creating a gap in the application of MiCA, leading to risks to
financial stability and potential knock-on impacts. We thus welcome the
sensible approach taken by the co-legislators which only excludes
activities provided in a fully decentralised manner, without any intermediary, which significantly reduces risks for investors.
- Also welcomes the approach taken on Non-Fungible Tokens (NFTs) to ensure that any NFTs that are fungible in some form or not fully unique, will be covered by MiCA. An outright exclusion of NFTs could have a serious impact on financial stability and investors.
- Welcomes the balanced approach adopted on the environmental impact
of crypto-assets which looks at treating crypto-assets in the same way
as other asset classes, by including them in the EU Sustainable Finance
Taxonomy. AFME’s members are committed to supporting the transition to a
sustainable economy and strongly support the further development of
sustainable finance. The financial sector plays a crucial role in
underpinning the transition to zero greenhouse gas emissions, notably by
helping to allocate capital and providing long-term investment in ways
that are consistent with achieving key climate objectives.
- Encourages further considerations to be given to how the final MiCA
text covers crypto-currencies to ensure some are not excluded from the
regulatory perimeter, which could expose investors to significant risks.
AFME
© AFME
