Web 3.0 technologies, namely artificial intelligence, blockchain, the Internet of Things, and big data applications have transformed many sectors by offering new business and investment opportunities. Traditional services have begun to move to decentralized structures. While the development and diffusion of these technologies offer options to individuals and institutions, on the other hand, legal uncertainties stand as an obstacle to the widespread adoption of these technologies and their full benefits.
With these technologies, notions such as “asset,” “responsibility,” and “ownership” and the regulations of the markets need to be reviewed. However, the issue of regulation is quite tricky: We are just beginning to understand crypto-assets, artificial intelligence tools, data circulation issues, and emerging issues. Even so, it is possible to see that the regulation movements have gained momentum all over the world in recent years.
Law is always lagging technology. It is not surprising that the same is true in the crypto asset ecosystem. With Bitcoin, blockchain technology has come into our lives, and crypto assets, crypto money exchanges, custodians, NFT platforms, smart contract platforms, and applications have become essential to transactions. Thus, both new opportunities and new risks emerged in many sectors such as banking and finance, health, supply chain, logistics, and insurance. Rapid regulation of this ecosystem would drive investors away and sabotage innovation. Complete inaction, as well, would have created risks for the protection of consumers, investors, and the market.
Here, MiCA, which was published in the Official Gazette on June 9 in the European Union and will begin to be implemented in 2024, is a regulation created as a result of a long-term preparation process to balance these conflicts of interest. The entry into force and implementation of this regulation has particular importance for Turkiye, which has always followed European Union regulations in areas such as banking and finance, consumer protection, and protection of personal data and is in feverish preparation for crypto asset regulations.
Over the past decade, there have been some major incidents regarding crypto assets: The Mt. Fox incident, Thodex, FTX scandals, and many more…
The foundations of MiCA, on the other hand, are laid with realizing the potential of crypto assets, especially after Facebook's Libra project. It can be said that the studies for MiCA in the European Union have been carried out since 2018. MiCA creates a remarkable framework for regulating crypto assets in the European Union.
Let us point out right away that MiCA is a Regulation, not a Directive. This means that in all EU member states, this Regulation will be directly applicable; that is, member states will not need to regulate new rules to transpose MiCA provisions in their domestic law.
The latest MiCA was adopted by the European Parliament in a final vote on April 20, 2023, and is expected to come into force in 2024. Especially with the increase in the market share of NFTs after 2021, although there are discussions about the scope of MiCA, it has been agreed to exclude NFTs from the scope.
MiCA is pretty long and detailed arrangement. It consists of 149 articles.
Looking at its primary objectives, we see that with MiCA, the European Union, while aiming at market integrity, financial stability, and consumer protection on the one hand, wishes to support innovation and fair competition on the other. One of the most important goals is to ensure legal certainty by avoiding different practices between member states. In addition, reducing the risk of fraud and money laundering and preventing illegal practices in crypto asset markets are also among the objectives.
First, the classification regarding crypto assets has been made in MiCA. It is good to mention that this definition is very inclusive and embraces new crypto assets that may emerge in the future. By this definition, a crypto asset means a digital representation of value or rights that can be transferred and stored electronically using a crypto-asset, distributed ledger technology, or similar technology. In this context, utility tokens, asset-referenced tokens, and e-money tokens are included in the definition of crypto assets in MiCA.
MiCA is applicable to anyone in the EU who issues crypto-assets and provides crypto-asset services or services to EU citizens. It imposes comprehensive rules and obligations on both crypto-asset issuers and service providers. These include cryptocurrency exchanges as well as custodians such as wallet providers, trading platforms, and advisory organizations. Crypto asset service providers are required to obtain a "passport". In addition, a set of rules have been determined that crypto-asset service providers must comply with. Some of these obligations can be listed as the obligation to act honestly, fairly, professionally, and in the best interest of customers, to prevent conflicts of interest, and to secure customers' crypto assets and funds.
It should also be noted that MiCA does not introduce new regulations in the areas that have already been regulated. In this framework, crypto assets that are already subject to current regulations in the field of financial services are outside the scope of MiCA; For example, MiCA will not be applied to financial instruments covered by the MiFID II directive, which is also being applied in the EU. Securities tokens and central bank digital currencies (CBDC) are also excluded. Similarly, electronic money tokens that do not qualify as e-money tokens are not covered by the regulation.
