MiCA was recently enacted and published in the official journal of the EU. Thus, the countdown has begun for the implementation of cryptocurrency legislation in 27 member states. This will be the first of its kind.
MiCA will turn Europe into a cryptocurrency hub
The European Union enacted its Crypto Asset Markets (MiCA) regulations on May 31. Thus, it paved the way for the regulatory guidance on cryptoassets and service providers to come into effect. This is a turning point for crypto. The EU’s regulatory package, first drafted in 2020, will govern the delivery and scope of services related to the cryptocurrency market.
The European Parliament adopted the MiCA regulations on 20 April. The bill was then sent to the Council of Europe for approval. On 31 May, European Parliament President Roberta Metsola and Swedish Minister of Rural Affairs Peter Kullgren signed the framework into law. Sweden currently holds the rotating presidency of the Council of the EU. MiCA was published in the Official Journal of the European Union (OJEU) on June 9, triggering the countdown for the law to come into effect. This means that crypto businesses set timelines for implementing and complying with MiCA’s requirements. The stablecoin rules will be effective from 30 June 2024. Also, the rules for exchanges will come into effect on December 30, 2024.
What does the new law bring for crypto?
MiCA defines a crypto asset as “a digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology.” The legislation also clarifies what qualifies as “cryptocurrency”. It also provides guidance on what “tokens” certain digital assets.
In addition, MiCA sets standards for crypto-asset service providers (CASPs) and crypto-asset issuers. Issuers of crypto-assets are required to comply with standards governing disclosure and disclosure, and provide complete and transparent information about the crypto-assets they issue. CASPs must also adopt security measures and comply with Anti-Money Laundering regulations.
MiCA legislation establishes CASPs as separate legal entities. It is possible for service providers to be licensed and do business in any of the 27 EU member states. Service providers need to resist market manipulation and abuse. They will also be under the scrutiny of regulators such as the European Banking Authority.
Stablecoin service providers will be required to provide a white paper with key details about the product and key players involved in the business. The whitepaper should also include a summary of the terms of the IPO, the type of Blockchain verification mechanism it will use, the rights associated with the relevant cryptoassets, the key risks for investors, and a summary to help potential buyers make an educated decision about their investment.
Cryptocurrency area outside the scope of MiCA
MiCA will not manage digital assets that qualify as transferable securities and behave like stocks or their equivalents. EU legislation does not cover Non Fungible Tokens (NFTs) or crypto assets that are currently recognized as financial instruments under current law. MiCA also does not regulate digital assets issued by the central bank, whether it is the digital currency of the European Central Bank, digital assets of national central banks, or services linked to cryptoassets provided by these institutions.
David Schwed, president of blockchain cybersecurity firm Halborn, says MiCA is a very important development. He also notes that it has demonstrated that a comprehensive framework can be created to provide clear direction to specific market segments. He adds that while MiCA excludes certain aspects of crypto, such as NFTs and decentralized finance, regulations are an important step forward. In this context, Schwed comments:
This regulation is an important step forward for the crypto community. It offers a uniform framework for all EU member states. Thus, it sets a precedent that I believe and hope the rest of the world will take note of and consider embracing.
Europe assumes crypto leadership, backlash to MiCA
Cryptokoin.com’ As you can follow from MiCA regulations, they were enacted nearly two years after they were first proposed. This has brought some regulatory clarity to crypto businesses in Europe. While not perfect, there are strict rules that crypto companies must follow and access the market. According to experts, it is possible for Europe to become a more dominant crypto hotspot, unlike the US, which has no set legislation and with increased enforcement actions against many crypto exchanges. Binance CEO Changpeng Zhao tweeted about MiCA’s latest promotion. Zhao said there are exciting business opportunities for compliant crypto service providers in Europe.
Important dates for the industry coming up, MiCA has now been published in the official journal of the EU: https://t.co/in3qlQO3wV
This means crypto businesses now have firm timelines to implement and be compliant with MiCA's requirements. Stablecoin rules apply from June 30,… https://t.co/qQtZbxZWqV
— CZ 🔶 Binance (@cz_binance) June 9, 2023
Zhao’s comments follow the US SEC’s recent lawsuit against Binance and its CEO. Kadan Stadelmann, chief technology officer at open-source blockchain technology firm Kodomo, says that while MiCA’s effectiveness is debatable, it is undeniable that MiCA has laid the groundwork for worldwide crypto regulation. Based on this, Stadelmann makes the following statement:
Other countries will likely choose a ‘wait and see’ approach before making their own adjustments. Still, the impact of MiCA is clear. Most countries will feel pressured to adopt some form of regulation in order not to fall behind in an increasingly important industry.
Alex Shevchenko, CEO of Tier-2 platform Aurora Labs, says the implementation of MiCA “could potentially influence policy makers and regulators in the US to consider similar approaches, striking a balance between consumer protection and market development. As a result, it assesses that this will lead to increased cooperation and harmonization efforts between jurisdictions. Indeed, members of the US House of Representatives Financial Services Committee are currently working on a draft bill that aims to create clearer laws for certain types of cryptocurrencies and bring stablecoins under the regulatory authority of the Federal Reserve.
