knowledge 23 August 2023 |

MiCA: Consultation Opened on National Discretions

Most significantly, the Department is consulting on how Irish law should address transitional arrangements for existing “virtual asset service providers” (“VASPs”) already providing services in accordance with Ireland’s domestic regulatory framework².

The closing date for submissions on the consultation is 15 September 2023.

Introduction

While MiCA was enacted in June 2023, the new framework and obligations for market participants that it creates will mostly take effect during the course of 2024.  For a summary and discussion of the significance of MiCA, please see our earlier briefing (here).

As an EU Regulation MiCA has direct effect in EU Member States, including Ireland.  MiCA does, however, leave certain matters to each Member State’s discretion and Ireland’s decisions on those matters will need to be implemented through national legislation; thus the Department’s current consultation.

Consultation Questions

The Department is consulting on the following four discretions:

Discretion 1:  Public Disclosure of Inside Information (Article 88(3))

Article 88(2) of MiCA permits issuers, offerors or persons seeking admission to trading of crypto-assets to delay public disclosure of inside information in certain circumstances.  Where public disclosure of inside information has been delayed by such a person, they are required to inform the relevant national competent authority (“NCA”) of the delay, and to furnish the NCA with a written explanation.  Article 88(3) allows a Member State discretion as to whether a record of such explanation should be provided only upon the request of the NCA.

The Department is asking participants:  “(a) Should Ireland exercise this discretion”; and “(b) How should this discretion be transposed in Ireland?”.

Discretion 2:  Administrative Penalties and Administrative Measures (Article 111(1))

Article 111(1) of MiCA requires each Member State to ensure that the relevant NCA has the power to apply appropriate administrative penalties and other administrative measures in relation to infringements of certain Articles of MiCA.  Member States are also entitled to supplement the NCA’s supervisory powers to impose higher levels of penalties than those prescribed by MiCA.  A Member State may, however, decide not to provide for administrative penalties where infringements of certain of those MiCA Articles is already the subject of criminal sanctions under national law as at 30 June 2024. 

The Department is asking participants:  “(a) Should Ireland exercise this discretion”; and “(b) How should this discretion be transposed in Ireland?”.

Discretion 3:  Transition Period for Existing Crypto-Asset Service Providers (Article 143)

Article 143 of MiCA provides a transition period for crypto-asset service providers (“CASPs”) that are already providing in-scope services in accordance with national law, prior to MICA’s applicability (on 29 December 2024).  In Ireland, this relates to VASPs registered with the Central Bank of Ireland, in accordance with AML legislation.  The transition period allows CASPs to continue to provide services for up to 18 months after MiCA’s date of application (ie until June 2026), or until they have been granted or refused authorisation under MiCA.

MiCA allows each Member State a discretion to decide to either (i) not apply the transition period at all, or (ii) reduce its duration, where the Member State considers its national regulatory framework to be less strict than MiCA’s (including where strong prudential requirements for CASPs are not part of the national framework).

On this topic, the Department is asking participants:  “(a) Should Ireland exercise this discretion”; “(b) How should this discretion be transposed in Ireland?”; and “(c)  How long should the transition period last?”.

Discretion 4:  Simplified Authorisation Application for existing CASPs (Article 143(6))

Article 143(6) permits Member States to adopt a simplified procedure for authorisation applications, submitted between 30 December 2024 and 1 July 2026, by entities that on 30 December 2024³ were already authorised under national law to provide crypto-asset services (e.g. VASPs in an Irish-law context).  The intention of the discretion is to allow Member States to leverage information already gathered under the national regulatory regime, thereby simplifying and shortening the authorisation application procedure under MiCA.

The Department is asking participants:  “(a) Should Ireland exercise this discretion to implement a simplified regime”; “(b) How should current regimes by evaluated and by whom?”; and “(c)  How long should divergent opinions on the compliance of current regimes be challenged?”.

Conclusion

The enactment of MiCA was a significant achievement for the EU and constitutes an important step in the development of a properly functioning and appropriately regulated ecosystem for the crypto-asset industry in general.  At the same time MiCA presents important challenges for participants in the crypto-asset industry to address.  This consultation represents an opportunity for such participants – especially existing VASPs – to have their say on the shaping of some important policy and legislative issues.  It will, therefore, be important to ensure those views are communicated to the Department through responses to the consultation before the closing date on 15 September 2023.

Also contributed to by John Boyle and David O’Keeffe Ioiart