30 December 2024 marks a historic moment for the European crypto market. This is when the new EU regulation on Markets in Crypto Assets (MiCAR) will become fully legally effective. In addition to the provisions on the obligation of crypto service providers to obtain authorization from BaFin or the supervisory authority responsible for them in the individual case before commencing business and the provisions already in force with regard to the issuance of E-Money Tokens and Asset Referenced Tokens, the provisions on the prevention and prohibition of market abuse and insider trading in the European crypto market provided for in MiCAR will also apply from 30 December 2024. The introduction of regulations to prevent possible price manipulation, market abuse or the exploitation of insider information prior to public disclosure represents a very important milestone for the crypto market and makes it even easier for traditional financial players to enter the world of digital assets. But what specific obligations will MiCAR impose on market participants and who are the new rules aimed at? Which market participants will have to comply with market abuse regulation under MiCAR when trading crypto assets in future?
MiCAR Market Abuse Rules Affect All Market Participants
An effective fight against market abuse requires comprehensive, market-wide and binding rules. The scope of the new MiCAR regulations to combat market abuse is therefore comprehensive and covers actions by all persons in connection with crypto assets that are authorized for trading or for which authorization to trade has been applied for. Addressees of MiCAR’s market abuse regulation are therefore both issuers of crypto assets and crypto service providers, but also investors and even persons who may not even be involved in specific transactions relating to crypto assets, such as rating agencies, specialist media or influencers with a focus on crypto assets. The text of the MiCAR clarifies that the rules apply to all transactions, orders and actions concerning crypto assets that are authorized or to be authorized for trading. In this context, it is irrelevant whether the action in question was actually carried out or omitted on a trading platform for crypto assets. The market abuse rules under MiCAR are therefore relevant for all market participants. For professional market participants such as issuers of crypto-assets and crypto-asset service providers, but also and especially publicly communicating influencers, this means that they must be aware of their obligations and should set them out in writing in the form of carefully drafted codes of conduct and apply them in their business operations.
Obligation to Maintain Effective Arrangements, Systems and Procedures
For all persons who professionally arrange or execute transactions in crypto assets, MiCAR also provides for a specific obligation to have effective arrangements, systems and procedures in place at all times for the prevention and detection of market abuse. This group of persons includes, in particular, crypto asset service providers that arrange or execute transactions with crypto assets (PPAET), whereby the term PPAET is borrowed from the EU Market Abuse Regulation. However, according to the draft interpretative guidance and technical standards published by ESMA in March 2024 in relation to the MiCAR abuse provisions, operators of trading platforms for crypto assets should also be considered PPAETs. The aforementioned crypto service providers therefore have an explicit obligation to create and maintain effective arrangements, systems and procedures to prevent and detect market abuse. The measures must of course focus on the way in which they conduct their own business. However, it may also be necessary in individual cases for companies to monitor their own employees with regard to transactions with crypto assets in the private sphere, particularly if they have access to insider information.
Attorney Lutz Auffenberg, LL.M. (London)
The lawyer responsible for all questions relating to the regulation of market abuse and insider trading under MiCAR at our law firm is Lutz Auffenberg, LL.M. (London).
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