Understanding the new proposed EU framework for cryptocurrency regulation

Cosgrove Gaynard Solicitors

As part of the Digital Finance Package released regarding cryptocurrencies in Europe ,it is proposed to regulate crypto assets and markets in crypto assets (MiCA) and to provide definitions of crypto assets and token subcategories. It will also set out rules for digital asset custody and capital requirements.

Cryptocurrency in Europe - What is proposed in terms of regulation

Digital transformation has become the buzz word across the corporate world. And the world of finance is no exception. Digitalisation and tokenisation have brought increased opportunities for trade, but also many risks.

On 24 September 2020, the European Union took a major step in an effort to regulate crypto assets by unveiling a comprehensive framework it hopes will come into force in 2024.

As part of the Digital Finance Package released regarding cryptocurrencies in Europe
(https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1684 )

It is proposed to regulate  crypto assets and markets in crypto assets (MiCA)and to provide definitions of crypto assets and token subcategories. It will also set out rules for digital asset custody and capital requirements.

If passed into law, the regulations will turn the European Union into the largest regulated market for cryptocurrencies in the world. These would be applicable across all 27 EU member states, with no requirement for ratification by individual members.

The background

In 2018, the European Commission asked the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) to assess the existing financial regulations' capabilities in the context of rapidly evolving crypto assets. The resulting "https://ec.europa.eu/info/sites/info/files/180308-action-plan-fintech_en.pdf" FinTech Action Plan recognised that crypto-assets mostly fall outside existing EU legislation aimed at protecting consumers and investors.

The Digital Finance Package builds on this initiative intending to promote the benefits of digital technologies for trade, including blockchain, artificial intelligence and Digital Ledger Technology (DLT), while controlling the risks.

Valdis Dombrovskis, the EU Trade Commissioner, said: "The future of finance is digital... Technology has much more to offer consumers and businesses and we should embrace the digital transformation proactively, while mitigating any potential risks."

Therefore, the EU aims to promote responsible innovation and user-friendliness in digital technologies for both consumers and investors, while limiting the risk for fraud and crime.

The Digital Finance Package includes a Retail Payments Strategy for a robust payments infrastructure, a legal framework for promoting opportunities while limiting risk, and a legal framework for digital operational resilience against cyber attacks.

The framework

The proposed legislation aims to mitigate volatility in the cryptocurrency markets. It also aims to reduce fragmentation across the EU whereby approval in one member state is reflected across all member states. It will also mandate a physical presence in the EU.

It also aims to provide a regulatory framework for asset-backed cryptocurrencies such as stablecoins, in the wake of Facebook's announcement of Libra.


The EU's MiCA proposal aims to make provisions for crypto assets that currently fall outside existing financial services legislation aimed at protecting consumers and investors.

It aims to promote innovation, the tokenisation of traditional financial assets and the wider use of blockchain and distributed ledger technology while preserving market stability and limiting the risk of crime. In that regard, the EU, through the European Blockchain Partnership, is proposing a sandbox testing facility bringing together regulators and experts, allowing a safe environment to test innovative solutions and identify obstacles in deploying them.

If you're looking for more information on Fintech law and hiring a Fintech lawyer, please check out our Fintech law blog.

All news
Norwich Pharmacal Orders Ireland - Google, Coinbase, Twitter, Facebook

A Norwich Pharmacal Order is a legal order that is used to compel an innocent third party to disclose information about another party who is involved in some form of malfeasance. Norwich Pharmacal Orders are becoming a common legal tactic to stifle online trolls on social media, as well as trace anonymous individuals online

Text Link
Pre controlled function roles for VASP applications

If you are a VASP in Ireland, you will need to register with the Central Bank for AML/CFT purposes. If you are a firm that is not established in Ireland, or you are not conducting business as a VASP before the 2021 Act was brought in, then you must be registered with the Central Bank before any services commence. As part of the regulation of VASPs with the Central Bank of Ireland, individuals holding pre-approval controlled functions within a VASP must be approved under the latest fitness and probity regime of the Central Bank.

Text Link

Digital inheritance is a new term that is becoming more widespread across the globe in relation to the transfer of digital assets in a broad sense. There is a completely new "digital asset" that has been created in terms of cryptocurrencies and therefore with that, inheritance queries follow.

Text Link
Why choose Ireland as a location for payment institutions

Ireland has slowly but surely established itself as an alluring destination for businesses in the Fintech sector.‍ From a solid regulatory framework to an advanced financial services ecosystem, Ireland’s financial technology sector is booming right now and is home to a surprising number of reputable domestic and international payment institutions. Let's take a closer look at the reasons behind this below.‍

Text Link