EU Securities and Markets Authority publishes final guidance for Mica

This final guidance advocates for a consistent use of the definition of “financial instrument” throughout EU member states. The European Securities and Markets Authority (ESMA) has issued its final advice report for member states transitioning to the Markets in Cryptoassets (MiCA) regulation.

Laws enacted under MiCA regulations went into effect in June 2024, with full implementation anticipated by December 30. The latest and last advise from the ESMA is intended to assist member states that are still seeking regulatory certainty with their final implementations ahead of the deadline.

According to Cointelegraph, the stablecoin market has grown significantly under MiCA direction. However, as of December 10, at least six European Union member states—Belgium, Italy, Poland, Portugal, Luxembourg, and Romania—were experiencing issues fulfilling the end-of-year deadline due to uncertainty and a lack of regulatory clarity in the original MiCA documents. According to the ESMA’s final guidance report, stakeholders welcomed the clear draft guidelines and thorough approach. Several responders emphasised the need for further clarity on specific criteria and conditions, while others voiced worry about the administrative burden that the draft guidelines could create.”

Regulatory uncertainty

Several member states and industry stakeholders participated in the comment period between association reports. The comments resulted in EMSA recommendations on 12 different issues, the majority of which concerned defining categories for specific assets and their legal uses.

The main concern was that member states would interpret several MiCA regulations differently due to a lack of explanations. “Several respondents highlighted the potential for legal uncertainty due to the scope of the guidelines and the way the conditions and criteria detailed in the guidelines could be understood by NCAs [national competent authorities],” the EMSA wrote. It went on to say that this might result “diverging interpretations across member states.”

To address these concerns, the ESMA developed a number of explanatory scenarios that covered various aspects of MiCA-based digital asset regulation. According to the report, MiCA has rejected to furnish “real world” examples because the rules do not express a judgement on the classification of certain cryptocurrencies or similar assets.

The research also raised concerns about the EU’s Markets in Financial Instruments Directive II (MiFID II) guidance. MiFID II was implemented during the 2008 global financial crisis to standardise financial practices across the union.

Member states are seeking for a reform to the rule that includes a clear definition of cryptocurrency assets as financial instruments. Member states were also concerned that the MiCA laws did not provide enough clarity for them to determine which assets were legally transferable, how to promote and ensure “technology neutrality” under current rules, and how classifications such as “securities,” “derivatives,” and emission allowances applied to different crypto-assets.

Despite the fact that this is the Final Guidance Report, which is due on December 30, the ESMA stated throughout the 49-page paper that it will continue to work with lawmakers and others to generate more clarification without modifying the wording of the legislation.

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