The European Parliament has approved the Markets in Crypto Assets (MiCA) Regulation, which will require crypto exchanges and wallet providers to seek a license and stablecoin issuers to hold appropriate reserves. This landmark law aims to protect consumers and ensure financial stability, and could take effect from mid-2024. The approval has been warmly received by the crypto industry, with Antoni Trenchev, co-founder and managing partner at Nexo, stating that “MiCA makes Europe fit for the digital age and will foster innovation and fair competition.” Deutsche Bank has also welcomed the regulation, stating that it will have a positive impact on corporate adoption, liquidity, and volatility.
However, attention has now turned to the details that need to be ironed out. While the outlines of the law have been known for some time, there is a 12-18 month transition period that will start ticking in June or July, and getting ready will be a bigger task for some than others. For example, Bitstamp’s John Ehlers has stated that “for those that are new to this business and coming into the European market, it is a step change in how they operate.” Even long-established players will have a task ahead, such as Binance, which holds a number of crypto registrations within the bloc.
EU agencies such as the European Securities and Markets Authority will now have to draft and consult on the “substantial package of implementing measures” that lie underneath the overarching MiCA law, known as the “Level One” text. There were last-minute disputes among lawmakers and governments on how the law should treat non-fungible tokens (NFTs) and decentralized finance (DeFi), and hastily-drafted compromise language may not always be clear about what is or isn’t an NFT or a decentralized grouping. While the EU law sets a common standard, it will be policed by individual national regulators in the bloc’s 27 member states, and there are concerns they could impose extra hurdles or undercut each other in a bid to attract business.
The final details of the law should “ensure consistent MiCA implementation across member states, especially at the licensing stage, to ensure a level-playing field and avoid regulatory arbitrage,” said Mark Jennings, Kraken’s Head of European Operations. Those final steps could prove crucial to MiCA’s success, Jennings suggested. “What once seemed a lofty legislative goal could soon become a universal standard for customer protection and business efficiency, if the EU can get the technical implementation of this framework right,” he said.
The MiCA Regulation has been hailed as a “pivotal moment for crypto regulation,” with Coinbase stating that it will “give crypto organizations the confidence to invest and grow in the region.” However, the fine details of the law will matter, and the crypto industry will be watching closely as EU agencies draft and consult on the “substantial package of implementing measures” that lie underneath the overarching MiCA law. It remains to be seen how individual national regulators in the bloc’s 27 member states will police the law, and whether they will impose extra hurdles or undercut each other in a bid to attract business. The final details of the law will be crucial to its success.