MiCAR vs MiFID II: How EU Crypto Regulation Differs



MiCAR (the Markets in Crypto Assets Regulation) and MiFID II (the Markets in Financial Instruments Directive II) are two key pieces of EU regulatory legislation shaping the financial and digital asset landscape. MiFID II, in force since Jan 2018, governs traditional financial instruments: shares, bonds, derivatives, fund units.

MiCAR, fully applicable since Dec 30, 2024, fills the gap left by MiFID II: crypto assets that are not financial instruments. The two rulebooks share a common conduct-of-business philosophy but apply to different things. This guide explains where each one starts and stops, how a token can fall under either, and what it means for an everyday EU user.

Key Takeaways

• MiCAR regulates crypto assets that aren't financial instruments, while MiFID II governs traditional financial instruments such as shares, bonds and derivatives.

• Most crypto assets, including Bitcoin and Ethereum, fall under MiCAR - but tokens that confer equity-like or debt-like rights, such as security tokens or tokenized bonds, fall under MiFID II instead.

• EU users should check that a platform holds the necessary authorisation under MiCAR as a Crypto Asset Service Provider (CASP) for crypto trading, or the relevant investment-firm authorization under the MiFID framework for tokenized securities.

MiCAR vs MiFID II: the short answer

The main difference between MiCAR vs MiFID II is the assets they govern. MiFID II lays out rules for traditional financial instruments such as shares, bonds, derivatives, and funds. Crypto currencies grew in relevance, but MiFID II largely left them unregulated. The EU created MiCAR to fix that.

Most tokens do not confer equity or debt rights on holders; therefore, they fall entirely outside MiFID II’s scope. To address this gap, the EU created a new rulebook in the same spirit as MiFID II. It covers crypto and aims to ensure best execution, suitability, and protection against conflicts of interest.

MiFID II took effect in 2018. MiCAR followed in 2024, expanding regulatory oversight to digital assets.

What is MiFID II?

MiFID II entered into force in Jan 2018. It replaced the original MiFID I, which dated back to Nov 2007. The 2008 financial crisis exposed gaps in the original rulebook. MiFID II tightened requirements to prevent the same from repeating.

MiFID II covers shares, bonds (fixed income products), derivatives, fund units, and structured finance products. Furthermore, all assets that can be classified as transferable securities fall under its scope.

It’s important to note that MiFID II is a directive, meaning that all EU member states had to transpose it into their own national laws. It is not to be confused with MiFIR (Markets in Financial Instruments Regulation), which is a directly applicable companion regulation.

Key rules imposed on firms’ conduct by MiFID II are:

• Best execution: businesses have to get the best possible outcomes for their clients (not themselves)

• Suitability and appropriateness: firms need to ensure financial products fit the client’s knowledge, experience and financial situation

• Transaction reporting: all trades have to be reported to the relevant national regulator

• Research unbundling: the investment research cost has to be separated from the execution cost as per MiFID II research unbundling rules

• Pre-trade and post-trade transparency: pricing data must be available before and after trade

• Systemic internaliser: all firms executing trades on clients’ behalf on their own account at scale must adhere to specific transparency rules

Furthermore, all firms wanting to offer investment services must pursue a license and be authorized by their national competent authority (NCA). Once they receive a license in one EU member state, they can choose to operate across the entire EU thanks to the concept of passporting.

Under MiFID II, investment firms classify clients into three categories, each with a different level of regulatory protection:

• Retail clients: Receive the highest level of investor protection. Depending on the service provided, firms must carry out appropriateness or suitability assessments and comply with extensive disclosure, reporting, and conduct-of-business requirements.

• Professional clients: Are presumed to possess the experience, knowledge, and expertise to make their own investment decisions and properly assess the associated risks. As a result, they benefit from a lower level of regulatory protection, with certain disclosure and assessment requirements reduced.

• Eligible counterparties: Typically include regulated financial institutions and certain large entities. When receiving eligible counterparty services (such as executing, receiving, or transmitting orders), they are exempt from some MiFID conduct-of-business requirements, although some obligations — such as acting honestly, fairly, and professionally and managing conflicts of interest — continue to apply.

What is MiCAR?

MiCAR follows a similar regulatory philosophy to MiFID II, but governs digital assets instead of traditional financial instruments. The regulation is the first comprehensive crypto framework in the EEA and has been applicable since December 30ᵗʰ 2024. Most tokens and other crypto assets didn't qualify as financial instruments. They remained without regulatory cover until MiCAR.

MiCAR distinguishes between three types of assets:

• E-money tokens (EMTs): crypto assets that are pegged to a single official currency, stablecoins such as USDC or EURS.

• Asset-referenced tokens (ARTs): pegged to a basket of assets, currencies or commodities

• Other crypto assets: all the assets that don’t fit in the above two categories nor qualify as financial instruments. Bitcoin and Ethereum are among these, and so are most utility tokens.

MiCAR does not cover financial instruments, nor does it address unique NFTs. Like MiFID II, MiCAR has a licensing regime. Crypto asset service providers (CASPs) must get authorized before operating in the EEA. Once a CASP is authorized in one member state, they can passport their licence to other Member States in order to freely operate across the EEA.

To improve transparency and consumer protection, MiCAR also requires:

• compliance with the Travel rule

• following Anti-Money-Laundering obligations

• reserve for EMT and ART issuers (to back the peg)

• crypto asset white papers before any crypto asset is offered to the public

• separation of funds by exchanges

Enforcement of MiCAR is split among three stakeholders: ESMA which oversees the broader crypto asset market and CASP rules, EBA (European Banking Authority) which supervises significant EMTs and ARTs, and the National Competent Authorities on a national level.

MiCAR vs MiFID II: side by side

MiFID and MiCAR originate in the same philosophy of the European regulators, aiming to ensure market integrity, enhance consumer protection and provide transparency. MiCAR has built and borrowed from MiFID. Consequently, suitability, conflict of interest rules, and best execution requirements appear in both.

The critical difference lies in the assets each covers.

MiCAR, as the newer regulation, builds on many principles found in MiFID II. For consumers, this means that the same protection principles apply to both types of assets, although licensing regimes, disclosure requirements, and the supervisory framework differ.

When does a crypto asset fall under MiFID II instead?

In some cases, a crypto asset falls under MiFID II instead. This happens when it meets the definition of a transferable security.

MiCAR explicitly excludes financial instruments from its scope. Tokens classified as securities are regulated by MiFID II instead. Crypto assets that are governed by MiFID II are:

• Security tokens: which represent a share in a company or an ownership right

• Tokenized shares: onchain representation of traditional equity

• Tokenized bonds: blockchain-based representation of debt instruments

• Most tokenized fund units if they confer rights in a collective investment scheme

• Tokens linked to derivatives

All other crypto assets, such as native tokens that don’t grant holders rights, EMTs, ARTs, and utility tokens, remain under MiCAR.

NFTs are unique in that they exist outside the scope of both MiFID and MiCAR. Truly unique, non-fungible NFTs don't qualify as financial instruments or as crypto assets under MiCAR. However, NFTs used in large collections or other setups may still attract regulatory attention.

What applies when?

When you have a tokenized bond on a public blockchain, it represents a debt instrument with interest payments making it a financial instrument → MiFID II applies

An EMT used for payments, such as a euro-pegged stablecoin, on the other hand, falls under MiCAR, requiring the issuer to meet the applicable MiCAR authorization requirements.

What it means for everyday EEA users

As an everyday EEA crypto user you might wonder why you should know about these regulations. It’s mostly helpful to guide your decisions and to be aware of your rights.

For crypto trading:

• When you buy, hold, or trade crypto assets on a centralized exchange, users may wish to verify whether the platform holds MiCAR authorization.

• MiCAR-licensed platforms must make white papers available for each asset and follow conduct rules. If they issue stablecoins, they must also hold reserves.

Using tokenized securities

If you buy or hold tokenized shares, bonds, or fund units, users may want to pick options that hold the relevant MiFID investment-firm authorization. A MiCAR license is not enough since they are dealing with financial instruments.

Tax reporting

You are responsible for your own tax reporting of crypto activities. MiCAR operates alongside other EU frameworks, including the DAC8 reporting framework. DAC8 requires crypto asset service providers to report user transaction data to tax authorities.

Bottom line

MiCAR and MiFID II share the same goal: market integrity, transparency and consumer protection. They complement each other by focusing on different asset types: MiFID II regulates financial securities, whereas MiCAR sets the framework for crypto assets.

Which one a specific crypto asset is regulated by depends on what it actually is. Most standard crypto assets fall under MiCAR. Tokens that bestow equity or debt rights however fall under MiFID II.

FAQ

What is the difference between MiCAR and MiFID II? The difference between MiCAR and MiFID II is that MiCAR covers crypto assets that aren’t financial instruments, whereas MiFID regulates financial instruments. Both share the same philosophy and aim to ensure market integrity, transparency and consumer protection.

Utility tokens, Bitcoin and Ether fall under MiCAR whereas security tokens such as tokenized bonds are regulated by MiFID II.

Does MiFID II apply to crypto? Generally, MiFID II does not apply to crypto assets unless the asset in question meets the definition of a transferable security. One example of that would be a security token, of a tokenized bond. Most common everyday crypto assets, such as Bitcoin, Ether, or utility tokens, fall under MiCAR instead.

Are security tokens regulated under MiCAR or MiFID? Security tokens are regulated under MiFID, not MiCAR, because they qualify as transferable securities. The reason is that they usually confer equity-like ownership rights on the holders, or entitle them to income flows (such as when holding bonds).

MiCAR excludes such financial instruments from its scope.

Are stablecoins regulated under MiFID II? Stablecoins are not regulated under MiFID II as they fall under the regime of MiCAR instead. MiCAR has different categories for stablecoins, classifying them as e-money tokens (if they are pegged to a single fiat currency) or as asset-referenced Tokens (if the backing comes in the form of a basket of assets).

Is a CASP the same as a MiFID investment firm? No, a CASP is not the same as a MiFID investment firm, as it holds a different license for a different asset type. CASPs hold a license that allows them to provide crypto asset services under MiCAR whereas an investment firm is licensed under MiFID II to deal in financial instruments.

Both use a similar approach to obtaining their licenses from a national authority.

Why did the EU need MiCAR if MiFID II already existed? The EU created MiCAR because most crypto assets did not meet MiFID II's definition of a financial instrument, leaving them unregulated. MiCAR adds requirements for crypto asset service providers such as white papers for offered assets, certified reserves, and consumer protection. MiFID II came into effect in 2018, and MICAR entered in force in 2024.



Investing in crypto‑assets is associated with risks, including high volatility and the potential loss of capital. Inform yourself thoroughly about the risks before making an investment decision. The information provided in this article is strictly for educational and informational purposes and should not be construed as financial or investment advice.