Chapter 16 concludes. Section 16.1 discusses the concentration effect of decentralised finance, Section 16.2 the supervisory challenges, Section 16.3 the impact of digital finance regulation on centralised finance, while Section 16.4 summarises four key challenges, and Section 16.5 concludes by formulating five key policy options.

Chapter 12 discusses the EU’s new pilot regime for DLT market infrastructures, as laid out in the Pilot Regulation (PilotR). Section 12.2 covers its scope, including activities and entities in scope, size limits, the interface towards the Settlement Finality Directive (SFD), geographic scope, and the EU passporting rules. Section 12.3 explains the procedure under PilotR, beginning with the fundamental requirement to appoint an operator that applies for specific permission to run the DLT market infrastructure – in contrast to the decentralised nature of DLT. Then, we outline how PilotR provides exemptions from MiFID/MiFIR and CSDR along with the associated conditions and compensatory measures – and the supervisory framework under PilotR. Section 12.4 discusses the governance of DLT market infrastructures based on the Business Plan Approach, by which the operator proposes the rules for its own operations – to be approved by the competent authority. Section 12.5 concludes.

Chapter 6 discusses MiCA’s bespoke product regulation for so-called stablecoins under the labels of ARTs and EMTs. Section 6.2 lays out the scope of Titles III and IV MiCA, after which Section 6.3 discusses the licensing requirements forming the basis for the token issuer’s European Passport. Section 6.4 then covers the rules on redemption rights and reserve management, while Section 6.5 addresses disclosure requirements. Section 6.6 lays out the EBA’s supervision of significant ARTs and EMTs, and Section 6.7 concludes.

The Markets in Crypto-Assets (MiCA) Regulation has become a pressing matter amid various financial scandals related to cryptoassets. With several EU Member States in the process of adopting their own cryptoasset legislation, MiCA provides a harmonised approach for the European Single Market. Following a principle of “technology neutrality”, MiCA applies only to cryptoassets that are not covered by other EU financial law, except for e-money tokens (EMTs) to which both MiCA and the E-money Directive (EMD) apply. Hence, MiCA is a piece of “gap-filling” legislation that relies heavily on concepts from conventional EU financial law: cryptoassets similar to MiFID financial instruments and other “investment assets” are subjected to rules similar to those of MiFID and the Prospectus Regulation (PR), while cryptoassets similar to “banking assets” are subjected to rules similar to the Capital Requirements Directive (CRD) and EMD. In sum, this creates a legal framework where the risks inherent in the different types of cryptoassets are accounted for and mitigated, but where the difficult question of classifying cryptoassets into legal categories becomes all-important.

Chapter 5 discusses the “whitepaper” or prospectus regime in Titles II–IV MiCA and compares it to the Prospectus Regulation. Following an introduction to the objectives, applicable legislation, and the risk-based differentiation of the prospectus rules, Section 5.3 covers the scope of MiCA’s prospectus rules. Section 5.4 explains the prospectus procedure, including the obligation to publish a prospectus, obliged entities, the approval and publication processes, along with expiration, updating, modification, and supplementing of the prospectus. Section 5.5 addresses the content and form of the prospectus, Section 5.6 the liability for information in the prospectus, and finally, Section 5.7 covers the EU-wide application of the prospectus (EU passport).

Chapter 9 discusses the rules applicable to investment funds investing in digital assets. We discuss the question of which cases the additional MiCA provisions apply to (Section 9.2) and consider the particularities of the general CASP rules laid down in Title V MiCA in the context of investment funds (Section 9.3) before we look into outsourcing (including brokerage and portfolio management and advice) in Section 9.4 and fund-specific questions regarding safekeeping and custody (Section 9.5). Section 9.6 concludes.

The focus of EU lawmakers with regard to cryptoassets has been largely regulatory. Reflecting the fact that private law is predominantly under the control of the Member States, and without seeking to be comprehensive, Section 13 takes a comparative view on the private law topics most relevant to cryptoassets. It covers efforts to harmonise national private laws, refers to principles issued by UNIDROIT and the European Law Institute, and considers relevant MiCA provision with private law effects in mind. Section 13.2 covers property law, including the important rules of title and transfer when multiple parties have competing claims to the same cryptoasset. Section 13.3 addresses contract law, including “smart contracts”. Section 13.4 on company law discusses decentralised autonomous organisations (DAOs) and the prospect of collaboration on the blockchain constituting a partnership as the default legal form of business organisation. Section 13.5 covers tort law, before Section 13.6 provides an overview of the difficulties often faced with enforcement of claims related to cryptoassets. Section 13.7 concludes with a perspective on the prospects of a uniform private law for cryptoassets.

Chapter 11 explains the supervisory framework under MiCA. Section 11.2 starts with MiCA’s rules for general supervision by national competent authorities (NCAs). Section 11.3 covers EBA’s supervision for significant stablecoins (ARTs/EMTs). Section 11.4 explains MiCA’s product intervention rules, which establish shared supervision between NCAs, the EBA, and the ESMA. Then, Section 11.5 covers MiCA’s extensive system for supervisory cooperation, both among NCAs, between NCAs and EBA, the ESMA, other European authorities, and also with third country authorities. Finally, Section 11.6 explains MiCA’s implementation timeline and implementing measures.

Chapter 15 discusses the new Digital Operational Resilience Act (DORA) in the context of cryptoassets and decentralised finance. Section 15.1 introduces the cybersecurity challenge, while Section 15.2 explains DORA’s objectives, approach, and its link to MiCA. Then, Section 15.3 provides an analysis of DORA’s scope, and Section 15.4 gives an overview of DORA’s tools, explaining each of DORA’s Chapters II–VII. Then, Section 15.5 delves into the crypto-specific matters, explaining the MiCA plus DORA situation and analysing the difficult issues of applying DORA’s concepts of “financial entities” and “ICT third-party service providers” in the context of decentralised finance, including fully decentralised crypto networks. Section 15.6 concludes.

Any type of asset can be tokenised, i.e., registered on a blockchain or other type of distributed ledger technology (DLT). Hence, the resulting cryptoassets take many forms, including currency/payment tokens, security/financial/investment tokens, and utility tokens. The technology offers new opportunities for issuers, investors, and the financial system at large but also challenges, including some new risks in addition to those already known by conventional financial systems. The EU regulatory framework for cryptoassets seeks to address these challenges while facilitating innovation and competition across the European Single Market. These rules have evolved since the EBA’s 2014 recommendations on AML/CTF provisions through the 2018 FinTech Action Plan and the 2020 Digital Finance Package. This has now resulted in an updated AML/CTF framework, the Markets in Crypto-Assets Regulation (MiCA) as a bespoke piece of financial regulation to fill gaps in existing EU financial law, the Pilot Regulation as the EU’s “regulatory sandbox” for DLT market infrastructures, and the Digital Operational Resilience Act (DORA) that promotes cybersecurity in the financial sector.

According to its “technology neutrality” principle, MiCA applies to all cryptoassets unless they qualify under other EU financial law, except for e-money tokens (EMTs) for which both MiCA and the E-money Directive (EMD) apply. Thus, Section 4.1 starts with the definition of ‘cryptoassets’, and Section 4.2 covers the exemptions from MiCA’s scope: exempted entities, the exemption for non-fungible tokens (NFTs), exemptions for assets covered by other EU financial law, and the exemption for fully decentralised services. Section 4.3 discusses MiCA’s geographical scope, and Section 4.4 provides an in-depth analysis of the difficult interface towards other EU financial law. Section 4.5 explains MiCA’s approach to addressing this difficult scope issue, and Section 4.6 concludes.

Chapter 8 discusses MiCA’s rules on crypto custody. After examining international developments (Section 8.2), we discuss the scope of MiCA’s custody rules (Section 8.3) prior to analysing the impact of MiCA’s general requirements for CASPs (e.g., fiduciary duties and safekeeping rules) (Section 8.4) and discussing Article 75 MiCA on crypto custody in-depth (Section 8.5). We go on by exploring how crypto custodians regulated by MiCA interact with other regulated intermediaries that safekeep assets either as their main business or as side services to supplement their brokerage or asset management services (Section 8.6), and then, we conclude (Section 8.7).

Chapter 14 provides an overview and critical analysis of the EU rules on anti-money laundering and counter-terrorist financing. Section 14.2 discusses the Transfer of Funds Regulation, Section 14.3 the relevant rules of of the AMLD, and Section 14.4 the respective provisions of MiCA. Section 14.5 summarises the remaining challenges and Section 14.6 concludes.