A Deep Dive Into MiCA
Examining Its Approach to Market Abuse in Crypto-Asset Markets.
Regulation (EU) 2023/1114, commonly referred to as the Markets in Crypto-Assets Regulation (MiCA), establishes a comprehensive regulatory framework for the crypto-asset market within the European Union. Recognizing the critical need to safeguard market integrity and investor confidence, MiCA introduces targeted measures to address market abuse risks, including insider dealing, unlawful disclosure of inside information, and market manipulation.
However, given the distinct nature of the crypto-asset sector—where many issuers and service providers are small and medium-sized enterprises (SMEs)—MiCA takes a proportionate approach rather than imposing the full set of market abuse rules under Regulation (EU) No 596/2014 (Market Abuse Regulation, or MAR), which governs traditional financial markets.
Importantly, while MiCA is being rolled out in phases, the aspects of market manipulation and insider trading were enacted and enforced at the end of 2024.
Title V: Inside Information and Insider Dealing
Title V of MiCA outlines the authorization and supervisory framework for Crypto-Asset Service Providers (CASPs), ensuring that only entities meeting specific prudential, governance, and conduct requirements are permitted to operate. It also details the supervisory role of national competent authorities (NCAs) in upholding market integrity and protecting consumers.
Additionally, Title V establishes clear prohibitions and disclosure obligations related to insider dealing and unlawful disclosure of inside information. It defines “inside information” as non-public, precise information concerning a crypto-asset or its issuer that, if disclosed, could significantly impact its market price. Individuals in possession of such information are prohibited from executing trades based on it to prevent unfair advantages and preserve market fairness. Moreover, issuers of crypto assets are obligated to disclose inside information publicly and in a timely manner, reinforcing market transparency and reducing opportunities for illicit trading activities.
Title VI: Market Manipulation
Title VI of MiCA focuses on combatting market manipulation and other abusive practices that could distort the proper functioning of crypto-asset markets. This section establishes a framework for detecting and preventing such behaviors, with a primary goal of enhancing transparency, reinforcing investor trust, and ensuring fair trading practices. Importantly, Title VI applies to more than just CASPs. It applies to anyone who professionally arranges or executes crypto transactions.
The regulation explicitly prohibits deceptive market behaviors, including:
- Dissemination of false or misleading information that could distort crypto-asset prices.
- Engaging in manipulative trading strategies, such as artificially inflating or deflating the price of a crypto asset through coordinated trades.
- Schemes designed to manipulate supply, demand, or value in a manner that misleads investors.
By addressing these risks, MiCA aligns the regulatory treatment of crypto assets with broader EU financial stability and consumer protection objectives, ensuring that market participants operate within a fair and transparent environment.
Title VII: Oversight by Competent Authorities, EBA, and ESMA
Title VII delineates the responsibilities of national competent authorities (NCAs), the European Banking Authority (EBA), and the European Securities and Markets Authority (ESMA) in overseeing MiCA’s enforcement. A key focus is ensuring cross-border regulatory coordination and effective information sharing among EU institutions to promote the uniform application of MiCA across all Member States.
With respect to Titles V and VI, which address insider dealing, inside information, and market manipulation, Title VII assigns specific supervisory and enforcement obligations to competent authorities. These include:
- Implementing surveillance systems to monitor compliance and detect potential market abuses.
- Investigating and prosecuting violations of market abuse rules, including insider trading and unlawful disclosures.
- Imposing administrative sanctions and remedial measures to deter non-compliance and uphold the integrity of crypto-asset markets.
Through these mechanisms, MiCA reinforces regulatory oversight and enforcement, ensuring that market abuse violations are effectively addressed and that firms operate within established ethical and legal boundaries.
Key Elements of MiCA’s Approach to Market Abuse in Crypto-Asset Markets
1. Confidence and Market Integrity
- Crypto asset markets, much like traditional financial markets, rely on investor trust and fair-trading conditions.
- Market abuse—such as insider trading and price manipulation—can erode confidence, distort price discovery, and deter participation. MiCA aims to mitigate these risks by establishing a clear regulatory framework that ensures market integrity.
2. Need for Proportionate Regulation
- Many crypto asset issuers and CASPs are SMEs with limited resources. Applying the full scope of MAR to them would be overly burdensome and potentially stifle innovation.
- Instead, MiCA introduces tailored market abuse rules that effectively address misconduct while maintaining regulatory proportionality to support innovation and market growth.
3. Prohibiting Harmful Market Behaviors
- MiCA explicitly prohibits insider dealing, unlawful disclosure of inside information, and market manipulation, ensuring price accuracy and fair trading conditions.
- These prohibitions apply to all crypto assets admitted to trading on regulated platforms, creating a more transparent and efficient market environment.
4. Scope of Application
- The market abuse rules under MiCA apply specifically to crypto assets traded on regulated trading platforms, ensuring consistent regulatory treatment.
- This approach balances the need for investor protection with flexibility for continued industry innovation.
MiCA seeks to strike a balance between strong market abuse rules and the unique characteristics of the crypto-asset sector, where many participants are small enterprises with limited compliance resources. By introducing bespoke prohibitions against insider dealing, unlawful disclosures, and market manipulation, MiCA ensures a regulatory framework that deters abusive practices while fostering an environment where crypto markets can operate with integrity, transparency, and investor confidence.
How StarCompliance Supports Crypto Compliance
StarCompliance (Star) offers a best-in-class suite of solutions to help firms manage the complexities of crypto compliance and ensure regulatory adherence. Key features include:
- Pre-Clearance for Crypto Transactions – Through its partnership with Aer Compliance, Star enables firms to automate and enforce pre-clearance requirements for cryptocurrency trading, reducing the risk of insider trading and market abuse
- Conflict of Interest Monitoring – Star’s tools provide comprehensive oversight of employee trading activity, identifying potential conflicts of interest related to crypto transactions and other digital asset holdings
- Automated Policy Enforcement – Firms can configure custom rules to align with internal policies and global regulatory requirements, ensuring employees remain compliant with evolving crypto regulations
- Surveillance & Risk Detection – Advanced analytics and monitoring capabilities help firms detect and address suspicious trading activity, including front-running and shadow trading in crypto markets
- Regulatory Reporting & Audit Trails – Star simplifies compliance reporting with detailed audit logs and real-time dashboards, helping firms demonstrate adherence to MiCA, SEC, FCA, and other regulatory bodies’ expectations
These solutions, combined with Star’s broader employee compliance suite, provide a seamless approach to managing regulatory risk across all asset classes, including crypto. To learn more about Star’s Crypto Trading Compliance Software, schedule a demo here.
Annual Crypto & Compliance Survey 2024
