The Banking Executive Magazine - May Issue

MICA “utility tokens” and also “stable tokens”; 2) introducing definitions of what constitutes “crypto-asset services” (CAS) and how these are regu- lated. These services include: • Custody and administration of crypto-assets on behalf of third parties; • Operation of a trading platform for crypto-assets; • The exchange of crypto-assets for other crypto-assets; • The execution of orders for crypto-assets on behalf of third-parties; • The reception and transmis- sion of orders for crypto-assets on behalf of third parties; • The marketing of newly issued crypto-assets or crypto-assets that are already issued but that are not admitted to trading on a trading platform for crypto- assets, to specified purchasers and which does not involve an offer to the public or an offer to existing holders of the issued crypto-assets; • Providing advice on crypto-as- sets; 3) introducing new requirements for issuers of crypto-assets; 4) setting out general requirements on crypto-asset services; 5) putting in place a client segrega- tion requirement; 6) applying and extending existing market integrity measures with re- spect to prevention of market abuse, insider information, in- sider dealing and market manip- ulation; 7) stipulating a change in control framework that applies to acqui- sitions and dispositions of crypto- asset service providers. 8) introducing a regime for mini- mum capital requirements; 9) setting definitive rules for the re- lationship between a crypto-asset issues and token holders; 10)creating and developing infra- structure for the trading and set- tlement of crypto-assets. IMPACT ON THE LEGAL FRAMEWORK FOR STABLECOINS Stablecoins, which are primarily is- sued for payment purposes, have been the focus of policymakers for some time. In particular, the rapid growth, increasing global use and critical role of stablecoins motivated European regulators to impose strict requirements to mitigate the in- creased risks to consumer protection and market integrity. In order to ob- tain a MiCA licence, issuers of stable- coins are required to meet the following conditions: • Have a registered office in the EU. • Build up a sufficiently liquid re- serve. • Offer every stablecoin holder a claim at any time and free of charge. ESG CONSIDERATIONS Actors in the crypto asset market will also have to provide information on their environmental and climate foot- print. Although Proof-of-Work cryp- tocurrencies (PoW), such as Bitcoin, are notorious for their huge energy consumption, MiCA is not issuing a ban on crypto currencies that use the PoW algorithm. Instead, it instructs to prepare a report on the environ- mental impact of crypto assets and to introduce a mandatory minimum sustainability standard for mecha- nisms such as PoW. CHALLENGES POSED BY MICA While MiCA may mark a quantum leap in how cryptoassets are regu- lated, it may provide opportunities for some and compliance challenges for others in respect of business in the EU. Affected stakeholders will need to take early action, to first as- sess the impact of MiCA and put any action plans to seize opportunities that MiCA introduces and deal with greater compliance obligations that are entailed. INDUSTRY IMPLICATION FOR MICA AND ROAD AHEAD FOR ARAB BANKS Arab banks should be prepared for MiCA implementation and should develop a pan Arab cryptoasset reg- ulatory framework that can interop- erate with MiCA and that is adapted to the needs of the Arab region. The MiCA initiative will affect the ability of market players to diversify their business and make it necessary to adopt a cryptoasset strategy. The regulation is likely to provide a har- monised legal framework with strong safeguards for historically non-regu- lated crypto-assets as well as for the service providers engaged in that business and the consumer. Arab banks should take into account the following key considerations for establishing a pan Arab cryptoasset regulatory framework that can inter- operate with MiCA and that is adapted to the needs of the Arab re- gion: • Developing a uniform legal frame- work for crypto-assets markets. • Devising a classification of cryp- toassets adapted to Arab countries needs and operations. • Developing technologies to trace cryptoasset operations. • Enhancing consumer protection and safeguarding against the bad manipulation of cryptoasset market and the use of cryptoassets in fi- nancial crime. • Preventing money laundering using cryptoassets. the BANKING EXECUTIVE 14 ISSUE 173 MAY 2023