Last time we came to conclusion, that MiCA is sort of a parallel universe of classical financial markets governed mostly by the Markets in Financial Instruments Directive (MiFID II) regime. This time we dive deeper into understanding what kind of crypto-asset instruments could be used in order to nurture the concept of healthy investments by using the assets that are related with the blockchain technologies which is very interesting and useful, and apparently is among us to stay.
We strongly believe that the days of crypto-scam games are coming to the end. The future belongs to properly regulated, supervised and managed issuers and prudent and highly ethical crypto-asset industry in general.
Basically MiCA regulation defines several possible crypto-financial instruments that shall be used through the properly licensed and compliant crypto-asset service providers. Also these instruments reaching some scale thresholds (for example, when they meet, or are likely to meet, certain criteria, including a large customer base, a high market capitalization, or a large number of transactions) shall be deemed significant which mean additional requirements from the regulatory perspective that shall be complied with.
MiCA regulation allows investors to do transactions with main two categories of crypto-assets: asset-referenced tokens (ARTs) and electronic money (e-money) tokens (EMTs). Although, there are also utility and payment tokens defined, these two categories are not MiCA regulated due to either being of a real classic retail and household nature or if these assets are regulated under MiFID II regime with completely different rules of the game.
In particular, MiCA regulation regulates: 1) asset-referenced tokens (ARTs) and 2) electronic money (e-money) tokens (EMTs).
ARTs are stablecoins backed by one or more classical financial instruments such as stocks, bonds and commodities. The main purpose of ARTs is bring classical assets (real estate, commodities and financial securities (stocks, bonds, even other cryptocurrencies)) into blockchain and crypto ecosystem to boost liquidity, fractional ownership and easier transferability. The bringing process happens that the real world asset is tokenized in digital tokens on a blockchain representing ownership of the underlying asset. Each token represents a fraction of underlying asset value. The so called smart contracts are sort of a tools that helps the tokenization process. These digital contracts are self-executing contracts where terms and conditions of the agreement are written directly into the code that governs the behavior of tokens. The process is sort of a guarantee of the rights of the token holders, including claims for returns underlying asset has provided. It provides transparency for the investors because only the code has to be considered the ultimate regulator of the product itself.
EMTs are so called “real stablecoins” that are pegged to a fiat currency like the euro or the US dollar. They are usually linked 1:1 with real money and are designed to keep a stable value. Similarly to ARTs, the money backing these tokens is stored safely in an account or other secure, low-risk place. Comparing to ARTs the issuers of EMTs has different regulatory requirements. Notably, before offering e-money tokens for the public EMT-issuers shall have already be registered as a bank or e-money institution. In other words, they are called “e-money” stablecoins because they operate under electronic money (e-money) regulations, especially in jurisdictions like the EU or UK. These rules govern how digital money is issued and backed to protect consumers and ensure stability. At this point the future of EMTs is somewhat blurred due to the EU iniciative of the concept of digital-euro concept that is on the agenda of European legislators and is planned to be on air in 2026.
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