MiCA’s Title VI market abuse requirements are closer than we realized. In this on demand webinar, we will provide a detailed application timeline for compliance with MiCA's market abuse rules, ensuring that you are well-prepared for each phase of implementation. We will also cover your responsibilities under MiCA's Title VI on the prevention and prohibition of market abuse involving crypto-assets, the steps required to comply with these new regulations, and the various market abuse typologies and their application to crypto-assets.

• Your responsibilities in regard to MiCA’s Title VI on the prevention and prohibition of market abuse involving crypto-assets
• Detailed application timeline for compliance with MiCA's market abuse rules
• Steps required to comply with this new regulation
• Market abuse typologies and how they apply to crypto-assets
• The broader implications of MiCA in shaping the global regulatory framework for cryptocurrencies

Interested in chatting about MiCA and how Solidus Labs can help? Reach out to Solidus Labs and let us guide you through the complexities of MiCA regulation. Ensure your crypto business is compliant and ready for the future. Or join our Telegram group, “Crypto Compliance and Legal,” where we discuss all things related to crypto compliance and legal matters.

Quick Highlights

• MiCA’s Title VI on the prevention and prohibition of market abuse involving crypto-assets will be fully applicable by December 30, 2024, without grandfathering period.
• Title VI applies to CASPs and any person professionally arranging or executing transactions on crypto assets.
• Title VI applies extraterritorially, meaning that it applies anywhere in the world and applies to any act or omission in the EU or in third countries
• Title VI applies to crypto assets that are either admitted to trading or in respect of which a request for admission to trading has been made.
• Title VI applies to apply to any transaction, order or behaviour concerning crypto-assets, irrespective of whether such transaction, order or behaviour takes place on a trading platform
• Entities must adopt internal policies and procedures to map, detect, and prevent market abuse.
• Suspicious transactions must be reported to the authorities.

FAQs

What is the MiCA regulation in the European Union (EU)?

• The MiCA (Markets in Crypto-Assets) Regulation is a comprehensive legal framework introduced by the EU to regulate the crypto-assets market. It covers crypto-assets that are not currently regulated by existing financial services legislation. The MiCA regulation aims to create a harmonized regulatory environment across the EU, addressing the opportunities and risks associated with new financial technologies.The MiCA includes rules for issuers and service providers of crypto-assets, including transparency, disclosure, authorisation and supervision of transactions. The MiCA’s legal framework supports market integrity, financial stability and customer protection.

What are the compliance requirements under the MiCA regulation?

• Compliance requirements under the MiCA regulation include obtaining authorization for CASPs, adhering to transparency and disclosure rules, implementing robust governance and operational frameworks, risks and internal controls systems, following AML (covered by the AML Directives and future AML Regulation) and consumer protection measures, as well as having in place strong compliance systems including transactions monitoring and trade surveillance, which allows prevention, detection and reporting. Issuers of asset-referenced and e-money tokens must meet additional requirements, such as maintaining adequate reserves and ensuring proper safeguarding of funds. These measures aim to enhance market integrity and protect investors.

What are examples of market abuse typologies?

• Some typical examples include wash trading, layering, spoofing, pump and dumps, front running. However, there are some extra challenges when applying these to crypto. There are also a few crypto specific forms of manipulation such as touting and bashing.
• Insider trading and insider dealing, unlawful disclosure of information also take another dimension in crypto. Indeed, and unlike the traditional world where all the news and material information is coming from press releases and government databases, in crypto, a lot of it happens on social media, whether it's Reddit, Twitter, Telegram, which adds a whole new challenge in terms of detection. At Solidus, we have built proprietary machine learning models to go out, analyze all of this data, create sentiment scores for all of these different assets to detect if they are being manipulated and then we compare the trades that are happening on CASPs and DEX to that sentiment data to detect any potential market abuse. The algorithm scans over the entirety of DeFi trading activities to look for cases of people trading in big volumes ahead of any of potential listing events on these major CASPs.
• Cross products and Cross venue typology where, for instance,  you could manipulate the price of an asset on a decentralized platform with the goal to manipulate the price of a derivative on a centralized exchange, is another example. There are many trading venues which are interconnected and thus multiplies the possible manipulation techniques. Something that happened on one trading venue can influence price on other trading venues, and DeFi also plays an important role in that.

Which category of VASPs would be the most impacted by Title VI?

• CASPs that are most affected are the ones that deal with orders and trades, and those which  run trading venues as they give access to the markets, to the clients, and therefore, they need to ensure that those clients or others do not abuse or manipulate the market. Issuers or offerers are also exposed. Even if the risk is slightly lower, they still need to consider how they need to comply with certain provisions and what they need to put in place.

What is the timeline of MiCA Title VI?

• The MiCA regulation title VI requirements, which address the prevention and prohibition of market abuse, will be fully applicable by December 30, 2024, no grandfathering period is applicable. While the language clearly applies the grandfathering period to title V on licensing requirements, allowing national competent authorities to grant crypto asset service providers up to 18 months of leeway to become compliant, it does not apply to Title VI. This means that all affected entities must comply with these requirements by the end of 2024.

Definitions

MiCA: Markets in Crypto-Assets Regulation, a legal framework by the European Commission to regulate the crypto market.

CASPs: Crypto-Asset Service Providers, entities that offer services related to crypto-assets.

AML: Anti-Money Laundering, regulations to prevent money laundering activities.

ESMA: European Securities and Markets Authority, an EU financial regulatory institution.

EBA: European Banking Authority, an EU institution that ensures effective and consistent prudential regulation and supervision.

DORA: Digital Operational Resilience Act, an EU regulation focusing on the digital resilience of financial entities.

TFR: Transfer of Funds Regulation, an EU regulation on the information accompanying transfers of funds.

PSD2: Second Payment Services Directive, an EU directive to regulate payment services and payment service providers.

MIFID: Markets in Financial Instruments Directive, an EU regulation that standardizes regulation for investment services across the member states.