MiCA Stablecoin Rules to Take Effect in June: How Will EU Countries Enforce?

• EU member states are gearing up to implement MiCA, a landmark crypto law that requires national regulatory bodies to issue licenses and oversee service providers.
• Policy watchers note that while MiCA is an EU-wide regulation, countries may implement slightly different technical standards, which crypto firms must strictly adhere to.

Policy watchers state that all 27 EU member states are gearing up to enforce their landmark crypto laws this year, and businesses looking to operate in the EU should pay attention to actions taken by national authorities.

In a few months, specialized regulations under the Markets in Crypto Assets (MiCA) framework targeting stablecoin issuers will come into effect, followed by broad licensing and other requirements for crypto firms in December.

After three years of crafting regulatory frameworks, MiCA was voted into law in 2023. Once enacted, crypto firms such as issuers, exchanges, and wallet providers that obtain licenses in any member state will be able to operate across the entire EU.

This means each jurisdiction must transpose EU-wide regulations into local laws, choose which regulatory body will oversee crypto, and prepare to license token issuers and other service providers.

For some EU countries that opt for strict regimes in internally regulating crypto, such as Germany and France, transitioning to the MiCA era might not be a significant shift. For others, this change could be substantial and bring new burdens to local authorities.

At least 10 countries are finalizing or have finalized local legislation. Some others are not as far along, but experts suggest there’s still time to ensure everything is orderly.

Sophie Lessar, a partner at DLA Piper law firm focusing on fintech and digital financial services, notes that MiCA is an EU-wide regulation, meaning it comes into effect directly across the entire EU within the agreed timeline.

“The rules will take effect. No regulatory body will take any action to prevent this situation,” she said in an interview.

However, Lessar adds that some technical requirements must be implemented at the national level.

While national authorities decide on some more flexible technical standards under MiCA, such as how long their exemption periods will last or what the regulatory fee structure will be, crypto firms should also prepare for compliance and be aware of subtle differences in the implementation process at the national level.

“The key is to enable people to understand, what does this mean for my business? Where am I doing business? If national authorities have the ability to implement slightly different approaches under MiCA, are there any differences?” Lessar said.

Choice of Regulatory Body

European countries are at various stages of transposing MiCA into local law, which may involve deciding which local regulatory body will be responsible for overseeing crypto – referred to as National Competent Authorities (NCAs) in the MiCA text – and whether to utilize the transition period allowed by the regime.

Marina Markezic, co-founder of the European Crypto Initiative (EUCI), which tracks progress on national legislation, suggests that with MiCA, it’s expected that local regulatory responsibilities might be divided between a country’s market regulator and central bank (for handling stablecoins).

For example, France has already designated its financial regulator, AMF, and its banking regulator, contrôle prudentiel et de resolution (ACPR), as its MiCA regulators under French Law No. 9.

AMF notes it’s working to align its existing digital asset service provider regulatory requirements with MiCA’s authorization requirements.

Croatia aims to establish a similar mechanism, and once national legislation is passed, MiCA responsibilities will be divided between the Croatian National Bank and the Financial Services Supervisory Agency (Hanfa).

“The Hanfa will issue licenses for the operation of cryptocurrency asset service providers and supervise them… However, according to the requirements of MICA, Hanfa will not approve cryptocurrency white papers,” Hanfa said in a statement.

Some countries like Slovakia and Hungary, without two financial regulators, may have their central banks solely responsible for crypto oversight. The Hungarian National Bank (MNB) confirmed it’s designated as the crypto regulator for Hungary through national MiCA legislation.

While this is more of an organizational issue, regulatory bodies may be burdened by licensing requirements.

Rosvaldas Krušna, Advisory Board Advisor at the Bank of Lithuania, said the new requirements for crypto firms to obtain approvals “will pose significant challenges for the central bank responsible for licensing matters.”

“With Lithuania having around 580 (crypto asset service providers), the Bank of Lithuania has started preparing in advance, and we believe we are fully prepared,” Krušna said. “We have allocated significant resources for preparation, including additional personnel and tools needed for supervision.”

Anja Blaj, policy expert at EUCI, notes Slovakia might not have a large enough financial market to establish a second regulatory body.

“I would say it also has to do with the overall fragmentation of the way EU member states operate and the differences in financial markets,” Blaj continued. “Because it’s still something specific to the member states, even though we have a lot of regulations, or more regulations coming in this area, it’s still specific to the member states.”

Blaj and the EUCI team have been in talks with industry representatives from member states, who say each country’s crypto industry has its own concerns about implementing, proposed laws, and NCA designations.

National Legislation

According to regulatory bodies, countries like Austria, Estonia, Denmark, and Croatia are still awaiting parliamentary approval for national legislation to align with MiCA.

“The Danish Parliament is currently passing national legislation that authorizes the Danish Financial Supervisory Authority (DFSA) as the national competent authority for Danish MiCA. The DFSA’s Head of Fintech, Payment Services, and Governance, Tobias Thygesen, said: “It is expected that this will be implemented in the spring.”

Croatia plans to implement MiCA rules through national legislation in the second half of 2024, Hanfa stated, while the Bank of Portugal said the country has not yet designated a national competent authority.

Ireland, Slovenia, Poland, and Lithuania, among other countries, have also publicly consulted on draft legislation.

As of writing, regulatory bodies in Belgium, Bulgaria, Greece, Malta, Romania, Slovakia, and Sweden have not responded, while those in Italy and the Czech Republic declined to comment.

Exemption Period

Lessar notes an area where countries may differ in implementing MiCA is in their exemption periods, allowing crypto firms to continue operating under old rules while transitioning to the new regime.

She adds that crypto companies need to tread carefully between different transition periods across the EU when starting operations.

While MiCA allows for an optional 18-month transition period, EU market watchdogs subsequently called for it to be limited to 12 months.

Spain’s financial regulator, the National Securities Market Commission (CNMV), noted it will implement a 12-month exemption period, allowing MiCA-authorized crypto companies and unauthorized crypto firms to “operate simultaneously.”

“This will be a relevant challenge for NCAs,” CNMV stated, adding that regulators must make “great” efforts to make distinctions clear to users. CNMV said it plans to hire 70 employees to handle MiCA and the EU Cybersecurity Act DORA.

Finland’s financial regulator, FIN-FSA, stated Finland hasn’t decided whether to impose a transition period on crypto companies registered in the country, as it’s still preparing national legislation.

“The legislative proposal must be passed by the Finnish Parliament. It is expected that the national legislation will still be passed in the first half of 2024,” noted Elina Pesonen, Head of Markets at FIN-FSA, in a statement.

Marine Krasovska, Head of Financial Technology Supervision at the Bank of Latvia, said the Bank plans to start the licensing process and accept applications six months after an 18-month exemption period, on January 1, 2025. She added that to ease the process, it will pre-assess crypto firms interested in operating in the country.

The Netherlands’ financial regulator, AFM, said it started accepting license applications from crypto firms on April 22, 2024. If approved, licenses will take effect when MiCA comes into force on December 30, 2024. The country’s central bank (DNB) is handling stablecoin regulation.

According to Croatia’s Hanfa, it may utilize the entire 18-month exemption period.

“According to the current legislative proposal, everyone listed in the register (as of the end of 2024) will be able to adjust during the MiCA transition period (until June 2026), during which time they must adjust their operations and obtain Hanfa’s MiCA authorization to operate as cryptocurrency asset service providers. Hanfa stated that entities that have not provided cryptocurrency services by the end of 2024 and wish to start providing services after that date must obtain a license to provide such services.

Future Outlook

Regulatory bodies issuing licenses to crypto companies for the first time expect an increase in workload. Like Spain’s CNMV planning to hire new staff, other regulators are bolstering their teams or providing them with training for the impending changes.

“National competent authorities have been working to adjust their capacity and workforce,” CNMV said.

Thygesen said once Denmark finalizes national legislation, DFSA will immediately accept applications from businesses, with a dedicated MiCA team in place to oversee implementation.

Hungary’s crypto regulator stated, “To effectively respond to the challenges posed by MiCA, the MNB has undertaken several organizational changes and established a dedicated board focusing on MiCA-related matters.”

Markezic of EUCI suggests that under MiCA, member states have a say in shaping licensing and compliance fee structures, which could be more favorable for attracting and promoting EU businesses rather than acting as a deterrent.

“Member states have quite a bit of sovereignty over their own financial markets. They’re their own markets, which means to some extent, their behavior is similar to, ‘Well, I want as many projects into my ecosystem as possible because I have an ecosystem that can support it. In a way, that’s how I compete with other members,'” Markezic said.

Meanwhile, multiple regulators, including France’s AMF, note they’re also consulting with the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) on technical standards under MiCA.

ESMA’s Executive Director, Verena Ross, described regulators’ role in implementing MiCA as providing more detailed guidance to the market and bringing regulators together.

It set June as the initial deadline for regulatory technical standards and public opinion guidance, with the year-end as the final deadline.

EU policymakers have been considering revisions to MiCA, which could expand its scope and tighten certain rules.

Germany’s crypto regulator, BaFin, said, “MiCA is an important first step in regulating crypto asset services and their providers.” “It also provides for further development of regulatory requirements, such as in pooling, lending, and pledging, that is, lending out crypto assets for consideration. BaFin will play an active role in this process.”

Enforcement seems to be progressing largely as intended.

“So far, authorization legislation and implementing rules have been on track. Also, bear in mind that only the ‘stablecoin’ provisions of MiCA (chapters 3 and 4) will enter into force at the end of June,” said Peter Kerstens, Digital and Cybersecurity Advisor at the European Commission’s Financial Services Department.

“There is a full summer and a full autumn, and even some winter left,” he added.