The recently enacted regulation on Markets in Crypto-Assets (MiCA) represents a significant step toward establishing a robust regulatory framework for crypto assets in Europe.
While the focus has been on consumer protection, market integrity, and financial stability, one aspect that might be flying under the radar for many web3 companies is MiCA’s sustainability disclosure requirements.
Indeed, recent industry research has suggested that more than 80% of crypto asset service providers (CASPs) may be unaware of the need to report ESG data from the European Securities and Markets Authority’s deadline of 30 December.
In this blog post, we’ll explore what MiCA’s sustainability disclosure entails, why it matters, and how web3 companies can proactively prepare to meet these new obligations.
At Thallo, we can help your company understand and manage these requirements, while also offsetting any residual emissions your business generates in the process.
The importance of transparency in web3
The crypto industry, particularly sectors involving Proof-of-Work (PoW) blockchains, has come under scrutiny for its environmental impact. MiCA aims to address this by enforcing transparency on the part of crypto asset service providers.
Why it matters: Transparency around energy usage and carbon footprint is crucial because it allows stakeholders—investors, consumers, and regulators—to make informed decisions based on a company’s environmental performance.
Mitigating risks: Proactively disclosing sustainability metrics helps companies reduce regulatory risk and potential public backlash. It also fosters trust with users and business partners who prioritize environmentally responsible operations.
There is, however, a significant absence of guideline documents for the white papers, as well as a lack of standardisation of sustainability indicators. This is compounded by the potential coordination failures, whereby the locus of responsibility for disclosure is unclear. This risks leaving CASPs potentially facing non-compliance through no fault of their own.
What does MiCA say about sustainability disclosure?
Under MiCA, CASPs will need to disclose information about the environmental and climate impact of the assets they issue or manage.
This reporting is not just about calculating emissions but also providing transparent information on how assets are being issued and maintained in terms of energy consumption.
Scope: The sustainability disclosure applies to all types of crypto assets that are regulated under MiCA—whether they are utility tokens, stablecoins, or asset-referenced tokens.
Metrics to be disclosed: Web3 companies will need to provide clear, quantifiable data on the energy consumption of their crypto operations, and in some cases, even the carbon emissions tied to the blockchain networks they use. This could include data such as energy usage per transaction, total annual energy usage, and the sources of that energy (renewable vs. non-renewable).
White papers.The regulation requires that this climate impact assessment be shared via publicly accessible white papers and website descriptions.
The level of transparency that MiCA demands mirrors other sustainability regulations seen in the corporate and financial world, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR).
Many web3 companies may however be unfamiliar with sustainability reporting frameworks, and the shift may seem daunting. But compliance with these regulations offers a powerful opportunity to differentiate your business as a responsible actor in the evolving digital asset space.New players, such as the MiCA Crypto Alliance, who were interviewed for this blog post, have emerged to provide greater clarity on the requirements facing companies.
MiCA whitepapers can discuss risks, governance structures, and other themes in different ways, and there are numerous possible assumptions that one can make to build MiCA sustainability indicators. For this reason, it is crucial for the industry to come together and coordinate best practices where the MiCA Regulatory Technical Standards fall short, hence pre-empting the need for future enforcement action or legislative proposals, reducing compliance costs in the medium term.
Juan Ignacio Ibañez, General Secretary of the MiCA Crypto Alliance
Key things to know
Sustainability reporting isn’t just a regulatory obligation—it’s a way to demonstrate leadership in a world increasingly focused on climate impact. There are also a number of benefits to complying to MiCA. These include:
Building trust with customers and regulators.
Aligning with global sustainability trends and corporate social responsibility (CSR) goals.
Positioning your company to attract ESG-conscious investors and partners.
Other key things to know as a web3 business include:
Gradual implementation: MiCA’s regulatory requirements, including sustainability disclosures, are being phased in, allowing companies time to prepare. It is crucial for web3 companies to stay ahead of these deadlines to avoid non-compliance penalties. 30 December 2024 is the compliance deadline for many eligible entities.
Deadlines: Specific timelines will vary depending on the type of assets issued and the jurisdiction, but web3 companies should be aware that they will need to start tracking their environmental impact well in advance.
Proactive action: By preparing early, companies can avoid last-minute scrambling and potentially damaging non-compliance penalties. This also provides a window to enhance their environmental performance and find offsetting solutions, such as those offered by Thallo, before the regulatory requirements are fully enforced.
Penalties: there are administrative fines of at least €5 million euros or 5% of total annual turnover for non-compliance. We’ve also seen organic action taken by countries, for example Coinbase refusing to list USDC unless it becomes MiCA compliant.
How Thallo can help
Thallo offers more than just compliance guidance. As a blockchain-based carbon credit marketplace, we provide web3 companies with the tools they need to manage their carbon portfolios and compensate for any residual footprints with high impact portfolios.
How Thallo supports sustainability:
Assistance in understanding and meeting MiCA’s sustainability disclosure requirements with our partner network
Expertise in helping companies offset the residual emissions of their web3 activities, such as energy consumption from transactions or blockchain maintenance.
By partnering with Thallo, your business not only meets regulatory obligations but also gains a competitive edge through sustainability leadership.
Contact us today to learn how we can help you navigate MiCA compliance and offset any residual emissions, all while positioning your company as a leader in sustainable web3 innovation.
