FinTax: A Comprehensive Guide to the EU MiCAR Regulatory Framework

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1. Introduction: From Regulatory Gap to Establishing a Unified Framework In 2023, the European Union officially launched the landmark Markets in Crypto-Assets Regulation (MiCAR). Against the backdrop of the gradual maturation of global crypto asset regulation, the EU introduced the MiCAR regulatory framework to establish a unified regulatory framework for the 27 EU member states, replacing the previously “fragmented” regulatory practices of individual member states. According to the EU legislative process, MiCAR will be implemented in phases: · From June 30, 2024, key provisions related to stablecoins (ART and EMT sections) will officially apply; · From December 30, 2024, the remaining provisions concerning licensing of Crypto Asset Service Providers (CASP), market manipulation prevention, investor protection, and others will come fully into effect. The background for proposing MiCAR can be traced back to the EU's Digital Finance Strategy introduced in 2020, which has the core objective of balancing innovation with regulation, protecting investors, and maintaining financial stability. Under this framework, MiCAR, together with regulations like the Digital Operational Resilience Act (DORA), forms the core regulatory system for the EU's digital finance. More importantly, MiCAR is not merely a “risk prevention” regulation; rather, the EU aims to provide long-term sustainable legal certainty for the blockchain and crypto industry through a technology-neutral legislative approach, making it more practically significant. The following will interpret the main contents related to the definitions of crypto assets, asset-referenced tokens, and other key aspects involved in the MiCAR framework, and analyze the impact of this framework on the European crypto market. 2. Main Contents of the MiCAR Regulatory Framework The MiCAR regulatory system can be distinguished at two levels: crypto assets and crypto asset service providers. 2.1 Definition and Classification of Crypto Assets Based on a technology-neutral approach, MiCAR defines “crypto assets” as “a digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology (DLT) or similar technology.” It categorizes Crypto Assets into three core types, detailed as follows: 2.1.1 Asset-Referenced Tokens (ART) ART is a type of cryptocurrency, distinct from Electronic Money Tokens (EMT), whose value is maintained by referencing some other value, equity, or their combination (Article 3, Paragraph 6 of MiCAR). According to Articles 16 and 20 of MiCAR, entities intending to issue ART must complete an authorization process prior to issuance, and the issuer must be a legal person established in the EU or an authorized entity. The authorization process must be initiated through a formal application (Article 18 of MiCAR). Additionally, the application must include a legal opinion confirming that the cryptocurrency indeed exists, falls within the definition scope of MiCAR, and does not qualify as an Electronic Money Token (EMT). Finally, the intended issuer needs to submit a cryptocurrency white paper, which can only be published after approval. 2.1.2 Electronic Money Tokens (EMT, similar to stablecoins) The value of Electronic Money Tokens is intended to remain stable by anchoring to the value of a specific official currency, and can be viewed as a stablecoin anchored to a single official currency (such as the euro, US dollar, etc.), specifically defined and regulated under MiCAR. According to Article 81, Paragraph 1 of MiCAR, only credit institutions or electronic money institutions can issue Electronic Money Tokens (EMT). Additionally, since EMT is legally classified as electronic money, issuers must also comply with the provisions of Chapter 2 and Chapter 3 of the Electronic Money Directive (EMD). MiCAR does not stipulate an authorization process for EMT issuers; they only need to notify the authorities and publish a white paper. 2.1.3 Other Cryptocurrencies Such cryptocurrencies, such as utility tokens and Bitcoin, are neither Asset-Referenced Tokens (ART) nor Electronic Money Tokens (EMT), and also do not fall within the category of cryptocurrencies excluded by MiCAR, typically requiring no issuance license. In principle, these cryptocurrencies still need to prepare a white paper, notify the authorities, and publicly release it, but there are exemptions under certain conditions.

2.2 Crypto Asset Service Provider (CASP) System

MiCAR has established a unified regulatory framework for Crypto-Asset Service Providers (CASPs) for the first time, imposing systematic regulatory requirements on CASPs that cover areas such as custody, trading, exchange, consulting, issuance, and transfer.

The core requirements for CASP include:

2.2.1 Unified licensing system (passporting)

Once a CASP obtains MiCAR authorization in any member state, it can operate throughout the European Union; this is known as the EU passporting mechanism. The core of MiCAR is to unify all enterprises providing crypto asset services to EU users under the regulatory framework of CASP. Any CASP wishing to operate within the EU must obtain authorization in any member state, and then it can serve the entire EU market through the “single license” principle.

In addition, MiCAR specifies 10 categories of services, and any enterprise engaging in any of these activities within the EU must obtain a MiCAR license and be subject to regulatory constraints. This classification system nearly covers all major business forms in today’s crypto market, which also means that whether it is a mature large trading platform or an innovative project in its early stages, as long as they provide relevant services to EU users, they must fall under the regulatory scope of MiCAR.

2.2.2 Transition Arrangements

To ensure a smooth transition, MiCAR has established transitional provisions: CASPs that have been compliant with national laws and conducting business before December 30, 2024, are allowed to continue operating during the transition period until they obtain or are denied a MiCAR license, or until they cease operations at the latest by July 1, 2026. Member states may set their own transition periods, with varying durations. This arrangement provides an 18-month buffer for the market, allowing both regulators and industry participants ample time for system alignment and compliance adjustments. It also effectively addresses the previous issue of “multiple regulatory oversight” within the EU, making the regulatory environment more certain and competitively fair.

3. The Impact on the Regulatory Landscape of Cryptocurrency Taxation

The introduction of MiCAR is not only an update of regulatory systems but also profoundly affects the EU's tax policy and compliance regulatory landscape.

3.1 Issuance Regulation: From White Paper Disclosure to Reserve Constraints

3.1.1 Ordinary Crypto Asset Issuance: White Paper Disclosure + Light Regulatory Model

Under the MiCAR framework, for ordinary crypto assets that do not belong to ART or EMT, the regulatory approach is relatively mild, characterized by “disclosure as primary, approval as secondary.” First, the issuer must be a legally qualified company or legal entity to ensure that their actions are legally traceable and accountable, allowing for recourse in the event of disputes. Second, the issuing entity must draft and publish a crypto-asset white paper in accordance with MiCAR requirements, disclosing key information, including but not limited to: issuer name, registered address, governance structure; the technical architecture, working principle, and rights mechanism of the issued tokens; risk disclosures (such as smart contract risks, liquidity risks, policy risks, etc.); investor rights and obligations, fee structures, issuance/burning mechanisms; compliance statements (such as wording like “this white paper has not been approved by EU regulatory authorities” to avoid misleading investors into believing it has official endorsement). Furthermore, MiCAR also requires issuers to implement a continuous update obligation for significant changes. This means that when there are changes in project structure, funding arrangements, risk factors, etc., that may affect investment decisions, the white paper should be promptly revised or modification notices disclosed to ensure that investors always have access to the latest and most accurate information.

Under this mechanism, projects do not need to undergo complex pre-approval processes, thereby lowering the entry threshold, which benefits innovators and small projects in participating in the market; at the same time, the mechanism design through information disclosure and responsibility systems can also balance the protection of investors' rights to know and maintain market vitality.

3.1.2 Stablecoins: Strong Regulation + Rigid Reserve Constraints

Unlike the relatively loose issuance system mentioned above, MiCAR imposes a strict and rigid regulatory framework on the issuance of stablecoins—namely ART and EMT—to ensure the robustness of these tokens in terms of redemption, reserves, and security.

(1) Authorization Requirements and White Paper Approval

Starting from June 30, 2024, all projects publicly issuing ART or EMT in the EU or listed on exchanges must obtain authorization from the competent authority of their respective countries. In the case of ART, issuers other than credit institutions must apply for MiCAR authorization and must submit a white paper during the authorization process, which can only be published after review by the competent authority. For EMT, the issuing entity must be a credit institution or an electronic money institution (EMI), authorized under the traditional Electronic Money Directive (EMD) or other regulatory frameworks. After submitting the white paper, the competent authority must determine within the stipulated time whether it is complete and complies with regulatory requirements; if it meets the criteria, it will be approved or registered. MiCAR also recognizes that certain ART or EMT may be large in scale due to their size and other factors, which may pose higher risks. Therefore, the European Banking Authority (EBA) will assume supervisory responsibility for the issuance functions of institutions issuing significant ART and certain important EMT under MiCAR.

(2) Reserve funds and asset segregation

The reserve and asset segregation system is the most critical component of the MiCAR regulatory design: issuers must establish a reserve asset pool that is segregated from their other assets, prioritized for ensuring the fulfillment of token holders' redemption requests. In other words, even in the event of the issuer's bankruptcy, this portion of the reserve assets should not be used for debt repayment or liquidation to other creditors.

The requirements for reserves in terms of composition and liquidity are also very strict:

· Reserves need to be diversified and can only include highly liquid, low-risk assets (such as deposits, government bonds, high-quality covered bonds, certain money market instruments, etc.).

· For the deposit ratio at credit institutions, the EBA proposed in the draft Regulatory Technical Standards (RTS) published in 2024 that at least 30% of funds for non-significant stablecoins must be deposited in banks to ensure the underlying redemption capability. If a stablecoin is deemed significant, 60% must be deposited. Additionally, when token holders submit redemption requests, the issuer should have the ability to promptly liquidate reserve assets.

(Refer to the original RTS: Article 36(1) of Regulation (EU) 2023/1114 requires issuers of asset-referenced tokens (ARTs), whether they are either if the ARTs are significant ARTs or not, to constitute and maintain a reserve of assets at all times to cover their liabilities against the holders of their issued ARTs matching the risks reflected within these liabilities. The reserve of assets is composed of the assets received when issuing the token holders and by the highly liquid financial instruments the issuer may invest in. In the case of tokens referenced to official currencies, a minimum part of the reserves should be held in the form of deposits in credit institutions (at least 30% of the amount referenced in each official currency if the token is not significant, and at least 60% if the token is significant). Upon redemption requests from token holders, the issuers should be able to liquidate the reserve assets.)

· If an ART or EMT is deemed “significant,” regulators may require higher liquidity and concentration limits, risk mitigation measures, and so on. In addition, if the market value of the reserve assets declines or undergoes adverse changes, the issuer must timely make up the difference (i.e., conduct “rebalancing” or compensation) to ensure that the total value of the reserve assets is always ≥ the total value of the issued tokens.

Under this framework, the requirements for the funds, liquidity, and operational resilience of stablecoin issuers are extremely high, significantly raising the issuance threshold. This “rigid constraint” mechanism of stablecoins aims to prevent large-scale redemption pressures, payment crises, and risks of confidence collapse, thereby enhancing the safety of the stablecoin system for holders and the entire financial system.

3.2 The Impact of MiCAR on the Cryptocurrency Taxation System

According to Article 98 of MiCAR, the tax authorities of each member state are incorporated into the regulatory cooperation framework for crypto assets and must share necessary information with financial regulatory agencies (such as the national financial management authority and the European Securities and Markets Authority ESMA) to identify cross-border transactions and potential tax evasion. This means that tax departments are officially embedded into the regulatory chain of crypto assets for the first time, no longer relying on post-event investigations or voluntary declarations, but rather utilizing the transparency mechanisms established by MiCAR to achieve real-time or periodic monitoring of transactions.

However, MiCAR does not directly stipulate tax administration rules, but complements the EU's Eighth Directive on Administrative Cooperation in Tax Matters (Directive (EU) 2023/2226, referred to as DAC8). DAC8 requires that, starting from January 1, 2026, all Crypto Asset Service Providers (CASPs) operating within the EU must report transaction data of EU resident clients to tax authorities, including information on buying and selling, transfers, staking, airdrops, and earnings. This data will then be automatically exchanged among EU member states, creating a comprehensive crypto tax information sharing network across the EU. Member states must complete the transposition of their national laws by December 31, 2025, to ensure the synchronized implementation of DAC8 and MiCAR.

The linkage of the two regulations marks the EU's formation of a dual-pillar compliance system of “MiCAR regulation + DAC8 tax reporting”: the former ensures the compliance and transparency of trading activities through a unified licensing and disclosure mechanism, while the latter achieves a closed loop of tax collection through a data sharing mechanism. This institutional design not only strengthens the tax authorities' ability to monitor cross-border cryptocurrency flows, but also effectively prevents common issues such as tax arbitrage and offshore hidden accounts.

In addition, the mandatory reserve and redemption system for stablecoins mentioned earlier in MiCAR also provides a quantifiable basis for tax collection through fund tracking. Daily market monitoring of reserves, regular audits, and public disclosures enable regulatory authorities to accurately assess the asset backing and sources of income for stablecoins, providing an objective basis for taxation on interest income, investment returns, and exchange rate differences.

4. Recommendations for Investors and Institutions In response to the systemic regulatory transformation brought by MiCAR, European investors and crypto businesses should adopt proactive compliance and risk management strategies. 4.1 At the Investor Level: Strengthening Tax Compliance and Reporting The systemic regulatory transformation creates a demand for automated tax compliance tools. For institutional investors with larger business volumes and more complex structures, solely relying on personalized tools can no longer meet compliance and auditing requirements; individual investors can also use such tools to record transaction and income data in real time, enabling automatic generation of tax returns, thus improving filing efficiency and accuracy. Taking FinTax Suite as an example, this system employs a modular architecture that can seamlessly integrate with mainstream ERP systems. Through an intelligent rule engine and a multi-dimensional reporting system, it covers critical aspects such as data capture, automated bookkeeping, report generation, and compliance auditing, helping businesses achieve financial transparency and tax compliance in a global regulatory environment. FinTax Suite also supports audit-ready GAAP/IFRS standard financial reports, dual-account systems for stablecoins and fiat currencies, AI-OCR invoice recognition, and bank statement imports, providing comprehensive financial and tax management solutions for on-chain payments and high-frequency trading companies. In addition, multinational investors need to pay attention to the cross-border reporting requirements under DAC8 and clarify the differences in capital gains tax and VAT among EU member states. 4.2 At the Institutional Level: Preparing for MiCAR License Applications For crypto exchanges, custodians, and wallet service providers, obtaining MiCAR authorization is a prerequisite for entering the EU market. Relevant institutions planning to enter the European market need to communicate in advance with regulatory authorities in EU member states to clarify the length of their national transition period. After all, while the threshold for MiCAR authorization is high, once obtained, it grants access to the entire EU market, providing a significant competitive advantage for long-term development. Companies from third countries wishing to provide crypto asset services in the EU must also establish a presence within the EU and apply for CASP authorization according to MiCAR. The only exception is the so-called “reverse solicitation” scenario, where the client initiates the service request entirely based on their own proactive willingness. It is important to note that the final report released by the European Securities and Markets Authority (ESMA) regarding reverse solicitation aims to tighten the applicability of reverse solicitation under the MiCAR framework. Non-EU platforms that contact EU clients through reverse solicitation without authorization may expose investors to legal risks. 5. Conclusion: MiCAR—The Balance Between Regulation and Innovation The introduction of the EU MiCAR marks the transition of crypto assets in Europe from a stage of wild growth to a more mature and regulated mainstream financial development system. It is both a response to risks and provides a systematic foundation for innovation. In the coming years, the interaction between MiCAR and regulations such as DAC8 and DORA will build a more transparent, secure, and efficient crypto market. For investors, compliance is no longer a burden but a mechanism for navigating towards legality and long-term gains. For businesses, MiCAR, while presenting thresholds, also serves as a passport to enter one of the largest crypto markets in the world. For all market participants involved, the implementation of MiCAR is not only a comprehensive compliance test but also a key window for seizing opportunities and achieving business leaps. Only by actively aligning with regulatory trends and deeply integrating compliance concepts into corporate strategy and operations can one remain invincible in the new competitive landscape.