The European Union (EU) has finalized its Markets in Crypto Assets (MiCA) legislation, which clarifies its approach on supervising the crypto sector. With all 27 EU member states now set to comply with the new regulation, other jurisdictions such as the UK may feel pressure to speed up their own crypto rules. The MiCA package sets out authorization requirements for crypto service providers and token issuers to be enforced by member states. It differs from the UK’s staged approach, with different regulators setting out their own requirements. The UK’s post-Brexit economic strategy is laid out in the Financial Services and Markets Bill going through Parliament, and it contains provisions to regulate crypto as financial instruments and stablecoins as payments.
Industry groups have praised the MiCA legislation, stating that it puts significant pressure on the UK and the US to deliver operational clarity for crypto. The EU’s adoption of MiCA solidifies its position as a regulatory leader for years to come, according to London-based lobby group CryptoUK. The UK has looked to MiCA for inspiration, with policymakers considering an authorization regime similar to that of MiCA. However, the UK’s crypto proposals leave out areas such as settlement and financial advice, diverging from MiCA. This has led to a period of uncertainty, as rules have yet to come out, according to Rhiannon Butterfield, policy adviser on payments and innovation at London-based lobby group UK Finance.
While the EU has managed to finalize its approach and offer clarity, the UK’s approach comes with a period of uncertainty. However, many crypto firms value the UK’s staged approach because it builds on existing financial regulation. The UK’s strategy enables it to adapt more easily to crypto as things change, according to Gwyneth Nurse, director general of financial services at the Treasury. The EU may still need to draft a follow-up legislative package dubbed “MiCA 2.0,” while the UK will bring out the relevant regulation at the right time, according to Riccardo Tordera Ricchi, head of policy and government relations at the London-based Payments Association.
The UK Treasury Economic Secretary Andrew Griffith has said that the government hopes to set out specific legislation for crypto in the next 12 months. While the UK is already behind the EU in setting rules for the crypto sector, it is attempting to regulate asset-backed stablecoins as payments. The EU has also made significant room for rulemaking around asset-backed stablecoins, but it is regulating them differently from the UK. The EU’s advantage over the UK may just boil down to the fact that it has managed to finalize its approach and offer clarity.
In conclusion, the EU’s MiCA legislation has set a precedent for other jurisdictions to follow. While the UK is behind the EU in setting rules for the crypto sector, it is attempting to regulate crypto in its own way. The UK’s staged approach has its advantages, allowing it to adapt more easily to crypto as things change. However, the EU’s MiCA legislation has solidified its position as a regulatory leader for years to come.
