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Victoria d’Este
Published: March 10, 2025 at 11:59 am Updated: March 10, 2025 at 11:59 am
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March 10, 2025 at 11:59 am
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In Brief
The European Union’s Markets in Crypto-Assets (MiCA) regulation aims to establish a comprehensive regulatory framework for crypto businesses, focusing on transparency, security, and anti-money laundering measures.
Regulatory frameworks are becoming increasingly important for ensuring transparency and security. The Markets in Crypto-Assets (MiCA) regulation, introduced by the European Union, aims to establish a clear and comprehensive regulatory framework for crypto businesses.
In this interview, Slava Demchuk, CEO and Co-founder of AMLBot, provides valuable insights into the key obligations for companies under MiCA, how these regulations compare to those in the US and Asia, and their impact on token ownership, anti-money laundering measures, and market integrity.
What are the primary obligations for companies issuing and managing crypto assets under MiCA?
There are a few key obligations. First of all, companies issuing tokens must create and publish a white paper. While many businesses have already done this before the regulation, it is now mandatory. This white paper should clearly explain why the token is needed, how the business intends to use it, and, ideally, companies should adhere to the white paper’s original vision rather than making drastic changes.
For companies issuing stablecoins, they must comply with the e-money directive, which imposes similar rules to those followed by electronic money providers. Since stablecoins are pegged to traditional fiat currencies, issuers must provide clear, non-misleading, and transparent information about the asset, the company itself, risks, and costs.
There are also minimum budget requirements, varying between 50,000 and 150,000 euros depending on the niche and business type. Additionally, companies must implement policies to manage operational, cybersecurity, and financial risks. This includes having written policies for Know Your Customer, Know Your Transaction, and data breach procedures.
In MiCA terminology, such companies are referred to as Crypto-Asset Service Providers. They must comply with anti-money laundering and counter-terrorist financing rules, which include customer due diligence, record keeping, and suspicious transaction reporting. Software like AMLBot can help automate these processes.
Crypto-Asset Service Providers must also prevent insider trading and unlawful disclosure of insider information. Market manipulation is strictly prohibited, meaning companies cannot manipulate the token’s price or trading volume. Some companies call this “market making,” but while providing liquidity is allowed, artificial inflation of volume or price is not. A well-known case illustrating this issue is Gotbit, where the CEO of a market-making company was arrested and is awaiting trial for alleged market manipulation.
To summarize, companies must provide clear information, avoid market manipulation, and ensure their communications with users remain transparent and non-solicitous.
How do MiCA regulations differ from existing crypto regulations in the US and Asia?
MiCA is a well-established and comprehensive regulatory framework that sets global standards for crypto services. Unlike MiCA, the US does not have a specific regulation for crypto services and often tries to fit crypto regulation within existing traditional financial laws. MiCA is proactive, while the US regulatory approach is more reactive.
In Asia, the situation is similar to the US, with regulatory frameworks appearing more fragmented. While the core principles, such as prohibiting market manipulation, remain the same across jurisdictions, the approach to regulation differs. In the US, for example, only accredited investors can invest in tokens under Rule 506, whereas in Europe, there are fewer such restrictions. The US also employs the Howey Test to determine whether a token qualifies as a security or a utility token.
Overall, the regulations are quite similar in principle, but the way they are implemented and enforced differs.
How do regulatory frameworks impact token ownership for retail and institutional investors?
Both retail and institutional investors must go through Know Your Customer procedures, where they provide documents for identity verification. In the US, only accredited investors can invest in private token sales under Rule 506. However, once a token is publicly available on a decentralized exchange, there are no restrictions on who can buy it, whether in the US or Europe.
We expect stricter regulations in the future, particularly for decentralized finance, which remains largely unregulated. Many illicit activities, such as money laundering, occur through decentralized finance platforms, and regulators are likely to address these gaps soon.
How does MiCA address anti-money laundering concerns in the crypto sector?
MiCA does not provide detailed anti-money laundering guidelines but requires companies to establish sound anti-money laundering and Know Your Customer procedures. This includes customer due diligence, document verification, transaction monitoring, and reporting suspicious activities to regulators.
A key requirement under MiCA is the “travel rule,” which mandates that sender and recipient information be shared between exchanges when transferring crypto assets. This ensures transparency and helps prevent illicit activities. Implementing the travel rule is complex, but it is now a regulatory requirement.
Companies must also provide anti-money laundering training for staff and store relevant data for several years. These measures add regulatory burdens, especially for startups, but they are necessary to counter fraud, hacks, and money laundering.
What are the biggest legal risks associated with issuing and trading digital tokens?
The biggest risk is the misclassification of tokens—whether they are utility tokens or securities. If a company misleads regulators or the market, it can face fines or more severe penalties. Another major risk is market manipulation. Companies that artificially influence token prices or trading volumes risk legal consequences. Avoiding these practices ensures compliance with regulations.
How do misleading marketing tactics in the crypto space harm investors, and what protections should be in place?
Misleading marketing can deceive investors into making poor financial decisions. There are two types of marketing approaches: active solicitation and reverse solicitation.
Active solicitation involves aggressive promotion, such as urging users to buy immediately with promises of price increases. This can lead to legal trouble. Reverse solicitation, on the other hand, provides information about the token and its use case without directly encouraging immediate purchases.
Regulators have implemented rules to protect retail investors from misleading campaigns. Companies should focus on educating users about their products rather than aggressively pushing sales.
What are the risks of using influencers and social media for crypto marketing?
Influencers can unintentionally engage in active solicitation, which could lead to legal repercussions for both them and the company they promote. If an influencer actively encourages their audience to buy a token, regulators may classify this as a violation of solicitation rules. Startups must be careful when working with influencers, ensuring that marketing efforts remain informative rather than promotional.
How can investors protect themselves from scams, rug pulls, and Ponzi schemes in the crypto market?
There is no foolproof method to avoid scams, but investors should rely on well-regulated exchanges and conduct thorough research. Tokens listed on reputable exchanges with stringent Know Your Customer procedures are less likely to be fraudulent.
On the other hand, platforms like PumpFun, which allow anyone to launch tokens without Know Your Customer or audits, have extremely high scam rates—over 90% of tokens launched there are fraudulent. Investors should verify project teams, check existing backers, and review audits before investing.
Ultimately, due diligence is the best protection against fraud in the crypto market.
Disclaimer
In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.
About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
More articles
Victoria d’Este
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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