By Mike Castiglione, Director of Regulatory Affairs, Digital Assets
In late June 2022, EU Parliament members announced agreement on a comprehensive bill that would require crypto businesses to follow anti-market abuse rules that build on the already-established rules for other asset classes outlined in the EU’s Market Abuse Regulation (MAR). This new bill, called the Markets in Crypto Assets (MiCA), would require “crypto asset service providers” (CASPs) to gain authorization before doing business in the EU. The bill defines CASP as trading platforms, custody providers, portfolio management services, those executing orders for third-parties, and those exchanging crypto for fiat.
The EU’s MiCA would cover a range of topics, including investor protection and custody of assets, environmental disclosures, reserve requirements for “stablecoins,” and “any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing.” The EU, as of this newsletter, has yet to publish MiCA’s updated text, but language from the bill’s March 2022 version indicates that many CASPs doing business in the EU would need trade surveillance to comply with the “prevention of market abuse” provisions. According to that draft, prohibited “market manipulation” behaviors includes:
- Giving misleading signals about the demand, supply, or price of a crypto asset;
- Employing a fictitious device or any other form of deception or contrivance;
- Securing a dominant position in an asset that creates unfair trading conditions;
- Placing or canceling orders that disrupts or delays the functioning of the trading platform, makes it more difficult for other persons to identify genuine orders on the trading platform, or creates a false or misleading signal about the price of a crypto-asset.
MiCA would come into force 18 months after approval from the European Council, the EU Parliament, and the formal adoption process, so the start of 2024 at the earliest.
Agreement on MiCA came days after an announced deal on the related Transfer of Funds Regulation (TFR) that sets EU-wide rules for reporting the identities of the senders and receivers of crypto funds. This is the so-called Travel Rule, an anti-money laundering (AML) regulation. (Find more about the TFR here.)
ViP: Eventus has deep experience deploying trade surveillance to digital assets and against the list of manipulative behaviors outlined in the EU’s Market Abuse Regulation (MAR) that already apply to other asset classes, such as FX, equities, and derivatives. The comprehensive coverage in Validus includes out-of-the-box procedures and the ability to customize alerts. That flexibility is especially important when applying compliance software to new regulations, like MiCA. The language in MiCA makes clear that market manipulation includes actual trades and also misleading orders, datasets that Validus is built to analyze. Eventus will watch for when MiCA’s new version is available and will be ready to help clients prepare for further developments in EU regulations.
About Eventus
Eventus is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventus.com.