European Union’s MiCA Laws. The first set of new laws under the Markets in Crypto-Assets (MiCA) Regulation is about to take effect, and they will have a profound impact on the cryptocurrency environment within the European Union. The introduction of MiCA is anticipated to occur in stages. Regulations about stablecoins are widely expected to be implemented on June 30. Providers of services related to digital assets will be subject to new rules in December.
Since its introduction in September 2020, officials have been building anticipation that this legislation, the first on the European continent, will establish standard market rules for crypto assets inside the EU. The EU Parliament adopted the MiCA regulations in April 2023. They aimed to usher in a new age of regulation for the crypto space, recognizing its importance as a European financial sector enterprise.
The Official Journal of the European Union published MiCA on June 9, 2023. After a year, the first set of rules is finally going into force. To illuminate the potential consequences of the first MiCA regulations, Cointelegraph spoke with several European Fpriustry professionals.
Overall Short-term Effects
There will always be some additional bureaucracy associated with government regulation, but some credibility also comes with it. The cryptocurrency business has been under intense scrutiny because of its speculative character and extreme volatility.
In an interview with Reinis Znotiņŏ, the head of the Latvian Blockchain Association, they stated that “psychological” consequences will be among the initial ones observed following the implementation of MiCA. Concerns over the legality of cryptocurrency transactions in the European Union have long since subsided. “Is the crypto business legitimate?” was a question that various interested parties had long voiced. In heavily controlled regions like the European Union, does cryptocurrency have any chance of survival?
According to him, people’s skepticism is starting to fade away now that the highest level of the EU Parliament has officially recognized crypto-related enterprises as legitimate and established a specific legal framework within which these companies must function.
European Union’s MiCA Laws: Regulatory certainty and a “market disruption” are two things that MiCA brings, according to Jón Egilsson, co-founder of Monerium and former head of the supervisory board of the Icelandic Central Bank. “This is because, starting from June 30th, EMTs [electronic money tokens] and CASPs [crypto-asset service providers], like wallets and exchanges, will technically be required to delist MiCA non-compliant stablecoins.”
Bye-bye, Stablecoins
This implies that customers residing in the European Union or the European Economic Area (EEA) may see their services limited or delisted from crypto exchanges if their stablecoins do not comply. Numerous cryptocurrency exchanges with operations in the European Union have already started doing this.
European Union’s MiCA Laws: Some cryptocurrency exchanges, including Uphold, Binance, Kraken, and OKX, have begun removing ready stablecoins like ($TUSDT$1.00) from their and OKX. Euro Tether (Ealso URT) is going to be delisted from Bitstamp. As demand increases in European markets, Egilsson predicted non-compliant stablecoin issuers may leave the EU market altogether, making way for stablecoins backed by the euro.
“Despite these restrictions, there’s a possibility that the stablecoin market could grow as retail investors gain confidence from the increased regulatory protections,” said Laura Chaput of Keyrock’s regulatory compliance team, echoing this sentiment.
The European Banking Authority (EBA) also released multiple last-minute reports on MiCA-related EMT-related Regulatory Technical Standards (RTS) on June 13. Please ensure that the standards include these reports, effective June 30.
Since the final forms of several of the more significant components of this regulation, including safeguarding regulations, just surfaced, the former chairmen noted that regulators would likely need to spend time clarifying some of the newly published regulatory concerns shortly. “Market participants will need time to adapt to the new regulations, so the EU Commission will most likely grant a grace period that extends beyond the end of the year, at least a few months.”
EU Crypto Businesses
Crypto companies operating in the European Union should prioritize keeping themselves updated on rules and any unforeseen changes, such as the ones already discussed. According to Egilsson, getting the right permission should be the priority. This necessitates adhering to stringent capital, governance, and organizational standards, such as keeping sufficient, high-quality reserves to back their worth.
He said that Stablecoin issuers that have been authorized and licensed as e-money institutions (EMIs) will encounter certain additional regulations, but their activities will not be fundamentally altered, referring to them specifically. For stablecoin issuers with existing e-money institution authorization, a minor assessment of their operations and security measures is necessary. “With the newfound clarity in the law, larger institutional players will be able to join the market, so there will likely be more competition in the medium term,” he continued.
According to Chaput, some companies may engage in “regulatory arbitrage” by moving or attempting to use reverse solicitation concepts. Meanwhile, she did mention that this shifting landscape may present “open doors” for well-established banks to join the stablecoin industry.
Users, this is for you
Users of cryptocurrencies in the European Union may be beginning to wonder what part they play in the situation as June 30th draws near. According to Chaput, they should be ready for an evolving environment, wherein “greater transparency about how these tokens operate” means less access to certain assets. Increased regulatory oversight aims to create a safer environment for investors while benefiting users through improved consumer protection measures, such as guaranteed redemption rights for EMT holders.
She went on to say that users may be tempted to trade on exchanges outside the EU to gain access to more tokens, but doing so could put them at risk because these platforms are not as regulated.
“Users will benefit from stronger protections and more transparent information about the crypto assets they’re dealing with,” Egilsson said, adding that we should expect for this long-term.”Although there might be a little pain in the beginning and more hurdles for new players to jump, we’re hoping that in the long run, crypto users in the EU and EEA will have it better and safer.”