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- The Markets in Crypto-Assets (MiCA) regulation by the European Commission aims to establish a legal framework for crypto-assets within the EU, promoting legal certainty, innovation, fair competition, consumer and investor protection, and financial stability.
- Stellar, an open-source blockchain platform, has implemented standards such as the Stellar Ecosystem Proposal (SEP) 0012 (KYC API) and SEP 0008 (protocol for regulated assets) that may align with MiCA regulations, potentially enabling the issuance of MiCA-compliant crypto-assets.
Unpacking the MiCA Regulation and Its Impact on Crypto-Assets
The European Commission unveiled the Markets in Crypto-Assets (MiCA) regulation in September 2020. This proposed legal framework, expected to be operational by the end of 2024, aims to govern crypto-assets throughout the European Union (EU). Its objectives include creating legal certainty, fostering innovation, ensuring fair competition, safeguarding consumers and investors, and upholding financial stability.
MiCA regulation targets e-money tokens, asset-referenced tokens, and utility tokens, but it also includes any other crypto-assets offered to the public. The issuers of these crypto-assets will need to adhere to several obligations such as releasing a whitepaper, securing authorization to issue crypto-assets, and following certain prudential rules when marketing these assets.
Stellar’s Alignment with MiCA Regulations and The Issuance of Compliant Crypto-Assets
Stellar, a non-profit open-source blockchain platform, has developed specific standards that may harmonize with MiCA regulations. Stellar Ecosystem Proposal (SEP) 0012, or the Know Your Customer (KYC) API, defines how Stellar clients can share KYC information with entities known as ‘Anchors’ and other services on Stellar. This standard enhances customer convenience by allowing the same KYC data to be used across multiple services.
In addition, Stellar has put forth SEP 0008, a protocol for regulated assets, or assets requiring issuer’s approval for each transaction. This standard helps identify such assets and lays out the procedure for conducting compliance checks and securing issuer’s consent.
While Stellar’s SEPs provide the tools and protocols to potentially issue MiCA-compliant crypto-assets, it’s important to note that achieving MiCA compliance involves not only the technical implementation of these standards but also adherence to specific legal and regulatory obligations set by MiCA. Therefore, while Stellar forms the technical bedrock to support such compliance, the actual issuance of a MiCA-compliant asset on Stellar hinges on the issuing entity’s actions and policies. For complete compliance with all applicable laws and regulations, it’s advisable to consult a legal or regulatory expert.
At BPV, we facilitate companies in issuing MiCA-compliant assets by offering a suite of services and software solutions. These solutions encompass security custody, retail customer onboarding, and integration into the Stellar network in alignment with the above-mentioned SEPs.