EUROCROWD’s Position on MiCA Regulation: Are Token Offerings A New Business Opportunity For Crowdfunding Platforms?
The European Crowdfunding Network welcomes the initiative of the European Commission in facilitating with the proposal for Markets in Crypto-Assets (MiCA) regulation new frontiers in the financial system and beyond.
To shed light on some of these matters we prepared the EUROCROWD Position Paper on MICA Regulation, Reinforcing European Innovation in Crypto-Assets, where we (i) assess the impact of this significant regulatory initiative, (ii) address several initial points of concern, (iii) explore the overlap between current forms of crowdfunding and blockchain-based fundraising methods, (iv) evaluate the possibility of their convergence in the future.
On 24th September 2020, the European Commission adopted and published the Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience. The MiCA regulation proposal is, without a doubt, the centrepiece of this regulatory package that triggered interest, not only in the EU but also abroad.
While this substantial piece of legislation is already on the table and will very likely enter into force beginning 2024, the general public has still a rather narrow vision when it comes to the purpose and reputation of crypto-assets.
MiCA in itself is heavily inspired by the existing financial regulatory framework, particularly MIFID II, however, affords crypto-assets a lighter regulatory regime than in the case of financial instruments. One of the most innovative features of MiCA is the legal status of the crypto-assets. Equipped with a bespoke definition, the crypto-assets effectively form a new asset-class separated from the types of assets that the legal system knew before.
MiCA legitimizes the crypto-assets and introduces a rather comprehensive regulatory framework that tackles:
- Categorization of crypto-assets that are not financial instruments or central bank digital currencies
- Different legal requirements on issuance and ongoing regulatory compliance depending on the type of crypto-asset
- Token Offerings e.g. process of issuance of crypto-assets, and legal requirements for crypto-asset issuers
- Regulatory requirements for crypto-asset service providers such crypto-asset custodians, crypto-asset exchanges and crypto-asset advisers, including
- market abuse practices that are defined and sanctioned.
Especially the part of the legislation addressing the issuance of tokens creates space for comparison between traditional forms of (financial) crowdfunding and so-called token offerings. In our position paper (see the link below) we document that the approach of the regulators is distinctly different as it was or still is in the context of financial forms of crowdfunding. Instead of regulating the platforms, MiCA regulates assets and crypto-asset services, none of which is directly comparable or equivalent to service providers regulated by ECSP. The issuance of crypto-assets that do not qualify as asset-referenced-tokens or e-money tokens requires only a very simple procedure, a short disclosure document, and no ongoing compliance. Furthermore, MiCA directly facilitates the establishment of secondary markets for crypto-assets, which have to cope with significantly lighter regulatory requirements than stock exchanges or multilateral trading facilities governed by MIFID II.
We believe that there is room for greater convergence between the recently enacted ECSP regulation and the new proposed MiCA regulation.