An issuer of crypto-assets refers to an individual, organization, or company responsible for creating and introducing a specific cryptocurrency into the market. Issuers are also responsible for the created digital asset, they establish operational rules and oversee the distribution process.
The release of cryptocurrency is called emission (follow the link for more information about cryptocurrency). Unlike the issue of traditional financial assets, cryptocurrencies are created through mining or digital code generation (follow the link for more information about mining).
Cryptocurrency issuers are key players in the digital asset market, new coins will cease to appear without them.
Cryptocurrency issuers are required to adhere to a number of regulations set by the jurisdiction in which they operate. Compliance with these regulations assists investors in making informed decisions about investing in cryptocurrencies and assessing the legality and reliability of a project. Stringent adherence to emission regulations significantly influences the formation of asset price.
As the number of cryptocurrencies continues to grow each year, an increasing number of countries are developing their own legislation regulating issuers’ activities on their territory.
MiCA Regulations for Cryptocurrency Issuers
Cryptocurrency issuers operating in the European Union will soon be subject to the MiCA (Markets in Crypto-Assets) regulation. These rules, designed to govern the European cryptocurrency market, were adopted in May 2023 and are scheduled to take effect in the following year, 2024. MiCA outlines various requirements that issuers of crypto assets and crypto asset service providers (CASPs) must adhere to. Among these requirements, issuers are obligated to provide comprehensive and transparent information about the crypto assets they issue. They must also strictly follow rules related to disclosure and transparency to prevent market manipulation and unauthorized disclosure of insider information.
It is essential to understand that miners who “mine” cryptocurrency are not its issuers. They serve as transaction validators and create new blocks in the blockchain to support the cryptocurrency network operation, but have no control over the issuance of the cryptocurrency itself.
Cryptocurrency issuers frequently raise capital through an initial coin offering, commonly known as an “ICO”. During an ICO, developers offer tokens or certain services to investors or subscribers. When investors purchase coins during an initial offering, they do not acquire ownership shares in the issuing company, instead, they often gain access to a specific closed platform, which can be traded later. Issuers use the funds obtained from ICOs to finance their activities and develop the projects they are promoting.
The primary objective of issuing cryptocurrencies is to introduce new digital assets into the market for subsequent financial gain (in the vast majority of cases). While creating a new crypto asset, the issuer typically establishes both general offerings and internal rules governing its release and distribution. Furthermore, it is the issuer who defines the particular utility of the issued asset and its specific purpose within its ecosystem.
There are three types of cryptocurrency emission:
- Limited one-time maximum coin emission. In this type, further mining is not possible. Examples of cryptocurrencies with this emission type include Cardano (ADA) and XRP. In the case of XRP, its creators initially “froze” a portion of the coins and introduced them to the market gradually, creating an artificial shortage.
- Limited controlled emissions. Here, the final number of coins that can be mined is known in advance, but they are released into circulation gradually as mining progresses. Bitcoin is a notable example of this type, as the number of BTC is limited and cannot exceed 21 million, but new coins are mined gradually.
- Unlimited issue. In this case, cryptocurrency mining continues constantly, and there is no predefined maximum limit on the number of coins. Ethereum (ETH) is an example of a token with unlimited issuance.
