MiCA Regulation : A New Era for the Crypto Industry 

The MiCA Regulation (“Markets in Crypto Assets Regulation”) is the first crypto-asset Regulation Published in the Official Journal of the European Union (“OJEU”) in June 2023 and is due to be fully effective by December 2024. This set of rules paves the way for a clearer and more robust set of regulations which will orient crypto-asset service providers and crypto-asset issuance. This Regulation gives special attention to matters regarding stablecoin, namely e-money tokens and asset-referenced tokens. MiCA covers several aspects, ranging from the rights and obligations of crypto-asset issuers, offerors, persons seeking admission to trading of crypto-assets and crypto-asset service providers. The law states that when crypto-assets do not have an identifiable issuer, they should not fall under any of the categories of this Regulation, the most known crypto asset, Bitcoin (“BTC”) is included in this group. However, crypto-asset service providers (“CASP”) offering services in relation to crypto-assets should be covered by this Regulation. When MiCA finally comes into effect, an entity seeking to operate in the EU will now need fewer licenses to operate, rather than being registered in every State Member, as it is now.

With the MiCA coming into force soon, the Crypto industry will no longer be in the grey area, as it is expected to increase clarity regarding the rules of the game, also allowing the inflow of both institutional and retail money into the market. Not only does it encourage the expansion of crypto exchanges and crypto-custodians, but it also stimulates the development of projects that employ Decentralized Ledger Technology (“DLT”) as the underlying technology.

There are numerous practical applications for blockchain technology beyond exclusively speculative projects like Dogecoin (“DOGE”), Shiba Inu (“SHIB”), as well as Helium (“HTC”) and Terra-Luna (“LUNA”) protocol. Before the introduction of MiCA, the majority of public blockchain networks operated in an environment with limited regulation and control. As a result, the potential for real world applications was limited. With this new piece of legislation, if such projects have the potential to create value, they are investable.

The European Union doesn’t want to marginalize these projects and limit technological progress due to lack of regulation. With this in mind, the European Union aims to become a global hub for such companies, contributing to a future-proof and transformative economy. It is expected MiCA will also enable the creation of new business activities and business models together with the crypto asset sector, which will lead to economic growth and the creation of new employment opportunities.

Credit institutions, central securities depositories, investment firms, market operators, e-money institutions, UCITS management companies and alternative investment fund managers are all eligible to provide specific types of crypto-asset services if certain requirements are met, without having to go through a completely new licensing process altogether. Blockchain and Web 3.0 has been a hot topic in recent years and many projects have emerged, many of which lack the potential to add value to the economy. Despite this, there are also extremely good projects in the sector, presenting a very good opportunity for venture capital firms to enter the industry. Given the recent establishment of the sector, many early-stage projects are looking for capital to grow and develop their projects, like the early days of the Internet. Despite the potential risks associated with this type of investment, there is tremendous value to be captured.

If you have any questions or require additional information regarding digital assets and the approach being taken in Portugal, please contact Miguel João at investor.relations@stagfundmanagement.com.

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