Stellar and MiCA

Stellar and MiCA

The Crypto Asset Market Regulation (MiCA), presented by the European Commission in September 2020, is a proposal aimed at creating a legal framework for crypto assets in the European Union (EU). Its objectives include providing legal certainty, supporting innovation and fair competition, protecting consumers, investors and market integrity, and ensuring financial stability.

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The MiCA regulation should start to apply from the end of 2024 directly in the EU without the need for national implementing laws. Regulation is primarily focused on e-money tokens, asset-pegged tokens, and utility tokens. Crypto assets offered to the public, other than electronic money tokens or asset-linked tokens, are also subject to the regulation.​​

Issuers of crypto assets subject to MiCA are subject to obligations such as the publication of a white paper, the need to be authorized to issue crypto assets, adherence to certain prudential rules when marketing crypto assets, and an obligation to act honestly, fairly and professionally towards holders of crypto assets.

On the other hand, Stellar, a non-profit open source blockchain platform, has set standards that can comply with MiCA regulations. One of them is the Stellar Ecosystem Proposal (SEP) 0012, also known as the Know Your Customer (KYC) API. This standard allows Stellar customers to easily provide KYC information to companies connecting to Stellar, called Anchors and other services. This allows the customer to enter their KYC information once and use it across multiple services without manually re-entering the information. The KYC API also handles images and binary data, supports the set of fields defined in SEP-9, and supports authentication with SEP-10.

Another relevant Stellar standard is SEP 0008, which provides a protocol for regulated assets. Regulated assets are assets that require issuer approval for every transaction. This standard identifies such assets and defines a protocol for performing compliance checks and requesting issuer approval.

Using SEP 8 Stellar provides the necessary tools and protocols to issue a MiCA compliant crypto asset. However, it is important to note that achieving compliance with rules such as MiCA will require not only the technical implementation of these standards, but also compliance with the specific legal and regulatory obligations outlined in the MiCA rules.

Thus, while Stellar provides the technical infrastructure to support compliance with such regulations, the actual issuance of a MiCA-compliant asset on Stellar will also be subject to the actions and policies of the issuing entity. It is recommended that you consult with a legal expert or regulatory consultant to ensure compliance with all relevant laws and regulations.

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