In the past few years, the world has witnessed rapid evolution and exponential growth in the realm of decentralized ledgers and, more specifically, cryptocurrencies. These cryptocurrencies represent a new form of currency that has been introduced into the economic system. They are based and exchanged through a so called decentralized blockchain technology, which is a distributed, immutable, and decentralized ledger made up of interconnected and encrypted blocks.

Bitcoin and Ethereum are among the prominent cryptocurrencies that have emerged, introducing a new form of currency into the economic system underpinned by the blockchain technology.

When compared to centralized and institutional entities, the blockchain technology provides indeed a strong alternative in terms of security, reliability, and transparency, because the decentralized system entails the complete absence of any intermediary in the execution of transactions and operations, encompassing not only cryptocurrencies but also various crypto activities. These characteristics of decentralization and diffusion have inevitably raised several critical aspects and concerns, leading to a collective interest in establishing a regulation.

The regulation on crypto-asset markets, or MiCa, was officially approved by the European council on 16 May 2023. The comprehensive regulation encompasses not only crypto assets themselves but also extends to their issuers and service providers. The council’s press statement underscores the immediate requirement for the implementation of regulations to safeguard European citizens who have invested in such enterprises and to prevent the improper use of the cryptocurrency industry for money laundering or financing terrorism. The goal of the paper is to safeguard investors and maintain financial stability by enhancing transparency and establishing a global framework for issuers and service providers.

The year 2022 has been a challenging year marked by a surge in inflation and the Federal Reserve’s decision to raise interest rates, leading to significant repercussions on both the stock and cryptocurrency markets. As a result, liquidity declined, and investments were redirected towards low-risk assets. Therefore, on April 20th, the European Parliament gave the green light to the MiCA (Markets in Crypto-Assets) regulation. Since then, the member states of the European Union have had 18 months to implement the new regulations at national level, aiming to establish a harmonized regulatory framework across the EU in order to protect the ultimate investor.

The MiCA rule addressed various issues, beginning with the categorization of all businesses associated with crypto-assets. The new laws impose a variety of requirements on organizations that provide digital asset services, along additional responsibilities on issuers. Furthermore, the principle of asset segregation is introduced for all service providers, stating that client funds must be clearly separated from those of the provider and allocated to a specific address on the blockchain.

The MiCA divides crypto-assets into three categories: Electronic money token (ERT), Asset referenced token (ART), and utility token. The first two types are stablecoins, which are virtual currencies tied to another financial asset that ensures greater stability. In fact, the ERT are tied to a sovereign currency (fiat), whereas ART tokens are related to a basket of assets that may include sovereign currencies and commodities. The third category, utility token, includes all assets that do not fall under the classification of ERT or ART.

The cryptocurrencies not taken into consideration are Bitcoin, NFTs (non-fungible tokens), and DeFI (decentralized finance), as they are subject to respective guidelines of ESMA (European Securities and Market Authority) and EBA( European Banking Authority).

The regulation of the cryptocurrency market will hopefully bolster the stability and appeal of these assets for traditional investors, significantly mitigating their volatility. This imperative requirement intensifies in the aftermath of the Russian invasion of Ukraine, where cryptocurrencies have been reportedly utilized to circumvent financial sanctions imposed on supporters of armed conflict.

Regarding crypto-assets, the MiCA(Markets in Crypto-Assets) regulation, purportedly set to take effect in mid-2024, will introduce the following primary regulatory measures.

• Issuers of broad- spectrum cryptocurrencies will be required to register and comply with regulatory provisions in order to ensure compliance with security standards.
• Clients funds must be segregated from those of the provider and allocated to a specific address on blockchain.
• A cryptocurrency service provider will be subject to new regulations if it has at least 15 million active users within the EU territory, on average, over the course of a single calendar year.
• If the average number and average aggregate value of daily transactions within a particular monetary region reach one million deals with a total value of 200 million euros, then a crypto-asset service will be considered extensively utilized as a medium of exchange.