In this Article
Dr Jane Nweike
What are the latest implications of Crypto Regulation in the EU? Dr Jane Nweike gives an update on the implications of MiCA and the impacts on crypto assets and distributed ledger technology (DLT). What does this mean for investment markets? Feel free to get in touch with us on contactmkfintech@kyprianou.com for further queries.
Introduction to Crypto-Assets
Crypto Regulation
With the recent passing of the Markets in Crypto Assets (MiCA) Regulation into law April 20, 2023, it is helpful to refresh one’s mind on the fundamentals of crypto to have a good understanding of how the regulation will impact the crypto industry.
What are Crypto Assets?
Crypto Regulation
The MiCA Regulation defines ‘Cryptoassets’ as:
‘A digital representation of a value or a right which may be transferred and stored electronically, using distributed ledger technology (‘DLT’) or similar technology’. This definition embraces a broad range of crypto assets some of which include:
– Cryptocurrencies
– Utility tokens
– Stablecoins
– Non-Fungible Tokens (NFTs)
– Central Bank Digital Currencies (CBDCs)
An explanation of DLT and how it works can be found here (MK Fintech Partners) and here (MFSA). DLT has also been shown to be applicable in the world of traditional finance to issue traditional financial instruments such as shares, bonds, and units of collective investment schemes. When issued using DLT, these financial instruments also qualify as crypto-assets.
How are Crypto-Assets Regulated?
Crypto Regulation
Different jurisdictions have different approaches to regulating the crypto industry. In the European Union (EU), various member states, prior to the MiCA Regulation, had put in place various legislation regulating the issuance of crypto-assets and crypto-asset service providers.
With the passing of MiCA, there is now a harmonized regulatory framework for crypto across the EU. In addition, the European Parliament has also put in place legislation to establish a pilot regime for the use of DLT in traditional financial markets.
In Malta, the Malta Financial Services Authority (MFSA) regulates the entire financial services sector, including the crypto industry.
Benefits and Risks of Crypto-Assets
Crypto Regulation
Benefits of crypto include among others:
– speed and efficiency in executing and settling transactions,
– its decentralized nature,
– programmability using smart contracts to automate certain processes,
– its global reach, which allows value to be transferred across borders with little or no restrictions,
– Privacy (anonymity), traceability and auditability (transactions on public blockchains are open to anyone for reconciliation).
However, crypto-assets also carry their own risks, including volatility, the risk of hacking and cyber-attacks on crypto networks, and the risk of financial crime, as the anonymity crypto-assets offer makes them attractive to illegal actors.
Further Reading
Crypto Regulation
The MFSA has been at the forefront of crypto regulation, with Malta being the first country to issue crypto legislation. The MFSA’s Crypto Assets Finsights offers a good overview of the crypto industry!
How Can We Help?
MK FINTECH PARTNERS
MK Fintech Partners can provide you with the advice and preparation you need to submit an application with the securities supervision team at the Malta Financial Services Authority (MFSA) to become authorised to operate under EU regulation. Give us a shout on contactmkfintech@kyprianou.com
More about MK Fintech Partners Ltd.
Michael Kyprianou Fintech Partners Ltd. is a Maltese company providing services in the FinTech sector. It comprises a team of dedicated experts who provide services such as Legal Advisory, Crypto Licensing, Token Issuers’ Licensing, Investment Services Licensing, and registrations of activities related to Fintech, Crypto, Blockchain & Data Protection, Investment Funds Services & Banking, Company Incorporations, and M&As.
MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).
The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at contactmkfintech@kyprianou.com or by telephone +356 2016 1010.
