Will MiCA’s introduction to the European market unleash numerous opportunities?
Markets in Crypto Assets (MiCA), which attempts to bring the mainly unregulated cryptocurrency markets under governmental regulation, is being marked as the first comprehensive set of laws in the history of the world.
It is a component of a larger digital finance package known as the “Digital Operational Resilience Act (DORA),” which aims to safeguard the financial services industry from fraud. DORA is anticipated to become law in July 2023, setting the stage for the regulations to gradually take effect by January 2025.
The European Union, with MiCA in the picture, has doubled down on how to regulate, instead of who is going to control the sector. This approach could prove to be a game-changer while the United States continues to struggle in the effort to figure out what digital assets are.
But the crucial query is how MiCA would affect the European cryptocurrency industry.
Eliminating Europe Exit Concerns
The EU Council, which is made up of 27 member states, unanimously adopted MiCA, making it the first significant country in the world to have a licensing system for cryptocurrencies.
The fact that lawmakers have mostly abstained from using the “regulation-by-enforcement” strategy can be credited to the positive welcome that the EU’s strong regulatory system has received. As a result, in order to maintain their competitiveness in the international market, a number of other markets and jurisdictions have started to look to MiCA as a model. Countries including the UK, Australia, and Hong Kong are following in their footsteps.
The potential impact of MiCA on the regulatory environment of the broader crypto industry has been discussed by a number of specialists.
For example, Brinda Paul, Director of Compliance at Banxa, believes MiCA sets a high bar for consumer protection, which will greatly benefit clients from a more dependable and trustworthy crypto market. The executive further stated that “a rise in customer confidence has an opportunity to increase participation in the crypto economy”.
Its introduction is mainly expected to work as a catalyst by attracting both startups and well-known corporations, creating the ideal environment for greater healthy competition.
Regarding end-users, Laura Chaput, head of regulatory compliance at market maker Keyrock in Brussels, stated that regulations pertaining to governance will increase transparency, regulations pertaining to stablecoin issuers will give greater “confidence that their tokens are accurately reserved and redeemable, and protects against market manipulation will strengthen market integrity.”
However, for regulated organizations that have previously implemented strict KYC and AML procedures, adjustments won’t be particularly apparent or substantial. But according to Przemyslaw Kral of Zonda, users of unregulated or non-compliant exchanges may experience withdrawal problems and may be required to give additional information regarding their identity and source of cash.
Taking Action Against Market Abuse and Manipulation
There is legitimate speculation on how the alleged malpractices at FTX might have been avoided had MiCA been put into place sooner. In reality, Stefan Berger, a member of the European Parliament’s economics committee, earlier asserted that the implementation of MiCA as a universal set of regulatory norms would have avoided such a catastrophe.
Regarding this, Banxa’s Paul pointed out that MiCA introduces severe safeguards, such as disclosures of inside knowledge, strict prohibitions of insider dealing, the illegal release of inside information, and market manipulation, to create a secure, transparent, and fair crypto market.
It is realistic to assume that acquiring approval under the regulatory system will not be simple, and continuous controls implemented by competent authorities will necessitate significant and ongoing compliance activity on the part of the crypto service providers.
Chief Compliance Officer of CLC & Partners Tiana Whitehouse added,
“The EU’s current Market Abuse Regulation (MAR), which pertains to securities and derivatives, and MiCA are broadly similar. As a result of the new regulation, CASPs and other parties who facilitate crypto-asset trades in the EU are required to have sufficient safeguards to prevent and detect market abuse and manipulation.
The Bone of Contention
MiCA will be implemented in two phases. Stablecoins are the focus of the first 12-month phase-in term, while the rest of the industry is covered by the next 18-month phase-in period. For the time being, attention will be paid to its implementation, which requires providing a comprehensive set of rules for the cryptocurrency market.
The regulation’s overall goal is to control the issue of and delivery of services linked to digital assets and stablecoins. However, it has excluded several parts of the digital asset market from its scope. The non-fungible tokens are one example.
The NFT industry will probably still be affected by the rule despite not being subject to MiCA’s specific white paper requirements, according to Yuriy Brisov, co-founder and chief legal officer at IOGINALITY NFT Marketplace. He went on to say,
“By imposing AML/CTF rules on NFT marketplaces, MiCA could contribute to greater transparency and trust in the growing world of digital art, collectables, and more, elevating the NFT space in the process.”