As the European Union’s Markets in Crypto Assets (MiCA) regulation approaches its final vote later this month, the race to become the bloc’s crypto hub of choice has already begun. The regulation seeks to regulate those issuing crypto assets, ensuring investor information is honest, while providers of linked services, such as crypto custodians, advisors or exchanges, will have to apply to one of 27 national authorities to get a license to operate across the whole bloc. Beyond its limited scope, the regulation is expected to offer a wider halo of credibility to a sector that is sorely in need of it after a year of market turmoil.
According to Rok Žvelc, a European Commission staffer who formed part of MiCA’s drafting team, “A crypto asset service provider, a CASP, will be a brand in the European Union… a kind of stamp of approval of the sector. Investors will know that if they turn to CASPS, they will have all the protections that MiCA provides.” Stablecoin operators, such as Circle, are also upbeat about the new regulation, which they hope to use as a springboard for their euro coin (EUROC), denominated in EU currency.
While much recent debate has focused on what MiCA doesn’t cover – crypto lending and staking, decentralized finance, and non-fungible tokens – all of which will be dealt with by further regulations if at all, the regulation still represents a significant step. As the first time a major jurisdiction, comprising some 450 million people, implements a stable framework targeting the sector, its benefits could be felt widely. The law could embolden potential customers, such as banks, to try out innovations like tokenized bonds.
With so much at stake, EU member countries are in a race to see which of them can become the crypto hub of choice. While in principle, MiCA sets a consistent level of rules to be followed across the bloc, in practice, national authorities may end up differing in how they implement and enforce. It’s a race not everyone’s trying to win. Dutch regulators have already said they aren’t prepared to cut corners in an effort to win business. There may also be more than one winner as different countries play to their strengths.
France, recently selected by Circle as its European home, and whose existing regime known as PSAN has already registered some 66 crypto companies, including Binance, eToro and Societe Generale, appears to be the clear leader. Though not the only EU country to anticipate MiCA – Malta, Estonia and Germany are among those with national regimes – France struck the right balance between attracting investment, protecting consumers and stabilizing markets. The similarities of PSAN and MiCA mean there’ll be a less bumpy landing for companies and regulators as they move from one regime to the other.
In Portugal, a country that attracted a significant crypto crowd in part thanks to a sympathetic tax regime, the industry is wondering whether it should follow France’s lead. However, the authorities have yet to anticipate the impacts of MiCA, which could result in Portugal losing the race to become a crypto hub. The longer crypto companies are left in the dark, the more they – and the wider economy – will suffer.
In conclusion, the forthcoming MiCA regulation is set to have an impact beyond its limited scope. It is expected to offer a wider halo of credibility to a sector that is sorely in need of it after a year of market turmoil. While the regulation does not cover everything, it still represents a significant step towards implementing a stable framework targeting the sector. With so much at stake, EU member countries are in a race to see which of them can become the crypto hub of choice. France appears to be the clear leader, having already registered some 66 crypto companies, including Binance, eToro and Societe Generale. However, other countries may also have a chance to play to their strengths and become a crypto hub in their own right.