The EU brings crypto-assets, crypto-assets issuers and crypto-asset service providers under a regulatory framework for the first time.

The Council presidency and the European Parliament reached a provisional agreement on the markets in crypto-assets (MiCA) proposal which covers issuers of unbacked crypto-assets, and so-called “stablecoins”, as well as the trading venues and the wallets where crypto-assets are held. This regulatory framework will protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector. This will bring more clarity in the European Union, as some member states already have national legislation for crypto-assets, but so far there had been no specific regulatory framework at EU level.

Recent developments on this quickly evolving sector have confirmed the urgent need for an EU-wide regulation. MiCA will better protect Europeans who have invested in these assets, and prevent the misuse of crypto-assets, while being innovation-friendly to maintain the EU’s attractiveness. This landmark regulation will put an end to the crypto wild west and confirms the EU’s role as a standard-setter for digital topics.

– Bruno Le Maire, French Minister for the Economy, Finance and Industrial and Digital Sovereignty

Regulating the risks related to crypto-assets

MiCA will protect consumers against some of the risks associated with the investment in crypto-assets, and help them avoid fraudulent schemes. Currently, consumers have very limited rights to protection or redress, especially if the transactions take place outside the EU. With the new rules, crypto-asset service providers will have to respect strong requirements to protect consumers wallets and become liable in case they lose investors’ crypto-assets. MiCA will also cover any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing.

Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint. The European Securities and Markets Authority (ESMA) will develop draft regulatory technical standards on the content, methodologies and presentation of information related to principal adverse environmental and climate-related impact. Within two years, the European Commission will have to provide a report on the environmental impact of crypto-assets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work.

To avoid any overlaps with updated legislation on anti-money laundering (AML), which will now also cover crypto-assets, MiCA does not duplicate the anti-money laundering provisions as set out in the newly updated transfer of funds rules agreed on 29 June. However, MiCA requires that the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant crypto-asset service providers. Crypto-asset service providers, whose parent company is located in countries listed on the EU list of third countries considered at high risk for anti-money laundering activities, as well as on the EU list of non-cooperative jurisdictions for tax purposes, will be required to implement enhanced checks in line with the EU AML framework. Tougher requirements may also be applied to shareholders and to the management of the CASPs), notably with regard to their localisation.

A strong framework applicable to so-called “stablecoins” to protect consumers

Recent events on the so-called “stablecoins” markets showed once again the risks incurred by holders in the absence of regulation, as well as the impacts it has on other crypto-assets.

In fact, MiCA will protect consumers by requesting stablecoins issuers to build up a sufficiently liquid reserve, with a 1/1 ratio and partly in the form of deposits. Every so-called “stablecoin” holder will be offered a claim at any time and free of charge by the issuer, and the rules governing the operation of the reserve will also provide for an adequate minimum liquidity. Furthermore, all so-called “stablecoins” will be supervised by the European Banking Authority (EBA), with a presence of the issuer in the EU being a precondition for any issuance.

The development of asset-referenced tokens (ARTs) based on a non-European currency, as a widely used means of payment, will be constrained to preserve our monetary sovereignty. Issuers of ARTs will need to have a registered office in the EU to ensure the proper supervision and monitoring of offers to the public of asset-referenced tokens.

This framework will provide the expected legal certainty and allow innovation to flourish in the European Union.

EU-wide rules for crypto-asset service providers and different crypto assets

Under the provisional agreement reached today, crypto-asset service providers (CASPs) will need an authorisation in order to operate within the EU. National authorities will be required to issue authorisations within a timeframe of three months. Regarding the largest CASPs, national authorities will transmit relevant information regularly to the European Securities and Markets Authority (ESMA).

Non-fungible tokens (NFTs), i. e. digital assets representing real objects like art, music and videos, will be excluded from the scope except if they fall under existing crypto-asset categories. Within 18 months the European Commission will be tasked to prepare a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal legislative proposal to create a regime for NFTs and address the emerging risks of such new market.

Next steps

The provisional agreement is subject to approval by the Council and the European Parliament before going through the formal adoption procedure.

Background

The European Commission came forward with the MiCA proposal on 24 September 2020. It is part of the larger digital finance package, which aims to develop a European approach that fosters technological development and ensures financial stability and consumer protection. In addition to the MiCA proposal, the package contains a digital finance strategy, a Digital Operational Resilience Act (DORA) – that will cover CASPs as well – and a proposal on distributed ledger technology (DLT) pilot regime for wholesale uses.

This package bridges a gap in existing EU legislation by ensuring that the current legal framework does not pose obstacles to the use of new digital financial instruments and, at the same time, ensures that such new technologies and products fall within the scope of financial regulation and operational risk management arrangements of firms active in the EU. Thus, the package aims to support innovation and the uptake of new financial technologies while providing for an appropriate level of consumer and investor protection.

The Council adopted its negotiating mandate on MiCA on 24 November 2021. Trilogues between the co-legislators started on 31 March 2022 and ended in the provisional agreement reached today.

Foreign subsidies distorting the internal market: provisional political agreement between the Council and the European Parliament

The Council and the European Parliament today reached a provisional political agreement on the regulation on foreign subsidies distorting the internal market.

The French Presidency of the Council of the European Union was built on the principle of economic sovereignty. Economic sovereignty depends on two key principles: investment and protection. The agreement reached on this new instrument will make it possible to combat unfair competition from countries that grant massive subsidies to their industry. This is a major step towards protecting our economic interests.

– Bruno Le Maire, French Minister for the Economy, Finance and Industrial and Digital Sovereignty

The regulation aims to remedy the distortions created by subsidies granted by non-EU countries to companies operating in the EU’s single market. It establishes a comprehensive framework for the Commission to examine any economic activity benefiting from a subsidy granted by a non-EU country on the internal market. In doing so, the regulation aims to restore fair competition between all undertakings — both European and non-European — operating in the internal market.

Investigation of financial contributions

The Commission will be empowered to investigate the financial contributions granted by the public authorities of a non-EU country to undertakings engaging in an economic activity in the EU by means of three tools:

• two prior authorisation tools — to ensure a level playing field for the largest mergers and bids in large-scale public procurement ;
• a general market investigation tool to investigate all other market situations and lower-value mergers and public procurement procedures.

The co-legislators have decided to maintain the notification thresholds proposed by the Commission for mergers and public procurement procedures:

• EUR 500 million for mergers;
• EUR 250 million for public procurement procedures.

The Commission will be empowered to investigate subsidies granted up to five years before the entry into force of the regulation and distorting the internal market after its entry into force.

Governance

In order to ensure uniform application of the regulation throughout the EU, the Commission will be exclusively competent to enforce the regulation. During this centralised implementation, member states will be kept regularly informed and will be involved, through the advisory procedure, in decisions adopted under the regulation.

If an undertaking fails to comply with the obligation to notify a subsidised concentration or a financial contribution in the context of public procurement procedures meeting the thresholds set, the Commission will be able to impose fines and examine the transaction as if it had been notified.

Assessment of the effect of foreign subsidies

As is the case under the EU state aid control framework, if the Commission finds that a foreign subsidy exists and that it distorts competition, it will perform a balancing test. This is a tool to assess the balance between the positive and negative effects of a foreign subsidy.

If the negative effects outweigh the positive effects, the Commission will be empowered to impose redressive measures or to accept commitments from the undertakings concerned that remedy the distortion.

Next steps

The provisional agreement reached today is subject to approval by the Council and the European Parliament. On the Council’s side, the provisional political agreement is subject to approval by the Permanent Representatives Committee (Coreper), before going through the formal steps of the adoption procedure.

The regulation will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

Background

At present, subsidies granted by member states are subject to state aid controls, but there is no EU instrument to control subsidies granted by non-EU countries. This undermines the level playing field.

To address this, the European Commission tabled the proposal for a regulation on foreign subsidies distorting the internal market on 5 May 2021. It serves as a tool to ensure a level playing field for all undertakings operating in the single market which receive support from an EU member state or from a non-EU country.

Good evening every one. First of all let me thank you, dear Prime Minister, dear Petr, for your warm welcome. It’s a great pleasure for me to be back in Prague, and to be back for an important moment, because in a few hours it will be the official start, the formal start of your rotating Presidency. You are taking the reins at a turning point for Europe: never has our Union faced such great challenges.

I welcome the priorities of your Presidency. We have many challenges ahead: the war in Ukraine, security and defence, energy, and the resilience of our economies. And I confirm that on October 6th and 7th, you will host the 27 European leaders for the informal meeting of the European Council. Thank you very much for that.

The EU’s unwavering support for Ukraine will be at the heart of your Presidency. I would like to thank you for your support on sanctions and for hosting Ukrainian refugees fleeing the war.

The EU will continue to provide robust support to Ukraine: financial, humanitarian and political. We have already mobilised 2 billion euros to provide military equipment.

But Ukraine needs more. And we are committed to providing more: more military support and more financial support. We are also ready to play an important role for the reconstruction of Ukraine: the destruction is massive and so are the needs.

Another important element: the war is also reshaping the European Union. Just last week, at our European Council meeting, we agreed to give Ukraine and Moldova candidate status. This is a historic moment for those countries, but also for the future of our European Union.

We will also work together to bolster Europe’s defence and security capabilities and your work to quickly develop the Hybrid Toolbox will be key to counter hybrid threats such as foreign interference, disinformation and disruptions in cyberspace.

We will of course also cooperate with partners in NATO. We were together a few hours ago and yesterday, and we participated in the NATO Summit, in Madrid. It was the occasion to reaffirm the strong ties, the strong strategic partnership between the EU and NATO.

Energy security is another example of the destructive impact of Russia’s war, and together, we must live up to our goal of phasing out Russian gas, oil and coal. We will also work together to reinforce our energy security by diversifying our energy sources, bolstering energy efficiency and speeding up renewable and low-energy sources.

And you will have the important task of leading the negotiations on the different topics related to this important common challenge. And I know how you are personally committed on the table of the European Council to make sure that the European Union will take the right decisions, because we do understand the serious consequences for the businesses, for the families, for the households, because of the inflation, because of those prices, and it’s the responsibility of the EU to take the right decisions; we will cooperate, we will coordinate, we will work together, and I’m confident that we will be able to make progress on that important topic.

Finally, I welcome your strong focus on strengthening the values of democracy and the rule of law.

We also want to work, and you mentioned it, with you on this new idea to strengthen security and stability on our European continent: it’s this idea of a European Political Community. And a few days ago, when we were together in Brussels, we had over the dinner an in-depth exchange of views on this important question, this important topic. The goal would be to foster dialogue at the highest political level and to boost cooperation between European countries that share common interests.

We will work together with you, with President Macron, who proposed this idea, and we agreed to propose to have the first meeting of this European Political Community in Prague, under your rotating presidency. The best would be to have this meeting on the 6th and the 7th of October. But we will try to do everything, to consult the countries that are supposed to participate in such a European platform, and we’ll see if it’s possible in October. If not, at least we will do everything to have this meeting in Prague, by the end of the year, and by the end of your rotating Presidency. But I repeat it, what we prefer is the possibility to organise this meeting in October, in parallel with the European Council meeting that will take place here in Prague.

Finally, I had the occasion, just before our meeting, to visit the memorial of Milada Horakova. And In these dark times in Europe, her fight to preserve democratic institutions is a powerful symbol. Her legacy, together with the bravery of Czechs and Slovaks who protested the 1968 Russian invasion of Czechoslovakia, is more important than ever.

Dear Petr, dear friends, rotating presidencies have the power to drive forward our priorities and to address urgent challenges. I know we can count on your leadership and on the people of the Czech Republic, just as you can count on the EU, on me, on the full support and cooperation of the European Union.

I look forward to our close cooperation to make Europe safer and more prosperous, inspired by our common strong values. Thank you.