TRM Talks: MiCA Implementation with the EBA's Elisabeth Noble

Last week, the European Banking Authority’s Elisabeth Noble joined TRM’s Ari Redbord and Isabella Chase for an in-depth discussion of what’s next for the Markets in Crypto-Assets (MiCA) Regulation.

Check out the video for the full conversation or for a roundup of the key takeaways, read our recap below.

‍What is the EBA’s role in MICA?

The European Banking Authority (EBA) is an EU regulatory agency responsible for financial supervision. Its core role is to develop and contribute towards the bloc’s single regulatory rulebook that applies to the banking and payment sectors.

Under MiCA, which entered into the EU’s official journal on 30 June 2023, the EBA will be primarily responsible for supervising issuance activities – related to e-money tokens (EMTs) and asset reference tokens (ARTs), commonly known as stablecoins – starting from June 30, 2024.

To get ready for its new role, last month, the EBA published three consultation papers, which cover the complaints handling process, issuance requirements and the authorization process for EMTs and ARTs. The consultations will will be open for  three months in order, as Ms Noble noted to give industry sufficient time to engage and comment and to ensure that the required measures are fair, proportionate and practical from a business model perspective. For the open consultations, a public hearing will take place on 19 September 2023, before the consultation phase ends on October 12.

In addition to consulting on new requirements, the EBA has also published a statement setting out its expectations for issuers who already offer stablecoins across the bloc. It identifies five grounding principles – surrounding governance, risk management, fair treatment of customers, disclosure standards and early communications with relevant (soon-to-be supervisory) authorities – that the EBA believes should help businesses transition to the new standard via a “compliance by design” approach.

‍What do Supervisors Need to Get Ready Ahead of MICA Coming into Force?

While industry is busy implementing measures to ensure compliance with MiCA, supervisory authorities such as the EBA also have their work cut out. Ms. Noble highlighted  the need to ensure that national competent authorities have access to the right tools (SupTech and RegTech) and training as they get ready to authorize entities to operate in Europe.

In order to advance supervisory capabilities in this space, the exchange of knowledge, data and ideas for SupTech tools is essential. The EU Supervisory Digital Finance Academy (EU-SDFA) offers a dedicated space for industry and supervisory professionals to come together to align on digital asset technology risks, and to provide training opportunities. Given the rapidly evolving digital assets landscape, there is a relative lack of in-depth expertise in the marketplace, which, according to Ms. Noble, means that training may prove a more effective upskilling strategy than recruitment.

The EBA has also been developing literature for engagement with regulated entities and national supervisors - such as a supervisory handbook, templates, manuals and procedures – and designing and rolling out training initiatives.

‍Key challenges crypto businesses will need to confront in the months ahead

One of the top technical implementation challenges in MiCA for ARTs and EMTs is working out how the regulation applies to their crypto businesses existing both within and outside of the EU. Addressing this, Ms. Noble’s advice was to look primarily for an EU nexus within a business’s operations and consider how MICA could be a good model for the global businesses.

In the TRM Talks, Ms. Noble spoke about the opportunities afforded by MiCA – both to global businesses as well as supervisory authorities outside the EU – in terms of setting out best practices. Given its holistic scope – covering a broad range of crypto-related businesses, including issuers, advisory service providers and others – MiCA provides a useful regulatory blueprint for other jurisdictions to follow.

For the future, Ms. Noble emphasized that the cryptosphere is a prime example of cross-border technology requiring cross-border supervisory consistency. In this vein, the EBA has already seen increased engagement from third countries in relation to MiCA. A two-way learning process is underway - with both the EBA and extra-EU jurisdictions asking questions of each other’s experience, and responses affording opportunities for knowledge building – and ultimately for future tweaks to the regulatory regime.

‍Which emerging topics could drive future regulatory change?

Though currently focused on implementation, the EBA is already looking further ahead. As Ms. Noble remarked, in the crypto space, “things are never static for long,” with the potential for AML risks and threats to the resilience of the financial sector coming from various products and services beyond MiCA’s scope. The EBA is tracking market developments, undertaking information gathering and analysis and reporting to the EU Commission to inform future reviews of MiCA and legislative proposals.