EU Crypto Industry Applauds MiCA – But Looks to What’s Next
A vote on Thursday sealed the deal on the long-awaited crypto law, but plenty of details remain to be ironed out.
The European Parliament's landslide vote in favor of new crypto licensing rules was largely met with applause from the industry, but now attention turns to the details that need to be colored in.
A long-awaited and expected approval of the Markets in Crypto Assets regulation means the landmark law intended to protect consumers and ensure financial stability can take effect in mid-2024. The initial reaction has been warm.
Shortly after the vote, crypto exchange Coinbase tweeted that the vote is a “pivotal moment for crypto regulation,” because the law will “give crypto organizations the confidence to invest and grow in the region.”
The law, known as MiCA, requires exchanges and wallet providers to obtain a license and stablecoin issuers to hold appropriate reserves,
Antoni Trenchev, co-founder and managing partner at crypto lender Nexo, said the approval shows that the “crypto industry has finally had this affirmation,” adding in an emailed statement that “MiCA makes Europe fit for the digital age and will foster innovation and fair competition.” Last year, Nexo announced it would shutter its U.S. business, saying that talks with regulators there had reached a dead end.
Optimism about MiCA’s impact seems to be matched in the traditional-financial sector. “We perceive regulation as a net positive for the industry,” a report from Deutsche Bank (DB) staffers stated, citing the likely effects on corporate adoption, liquidity and volatility.
Crypto is “a dangerously unregulated sector,” research analysts Marion Laboure and Cassidy Ainsworth-Grace wrote in the report, and that has “exposed investors to massive losses across all crypto platforms.”
The key question now is how companies will prepare. John Ehlers, chief operating officer at crypto exchange Bitstamp, said that while the outlines of the law have been known for some time, there's 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 those that are new to this business, and coming into the European market, it is a step change in how they operate,” Ehler said on CoinDesk’s "First Mover" show on Thursday.
“If you’re new to this space, you’re not going to have very stringent AML (anti-money-laundering) requirements for account opening,” Ehlers said. “If you’ve already been regulated in the EU (European Union), you’re probably in pretty good shape.”
Even long-established players face a long road ahead. That includes Binance, the world's largest crypto exchange by volume. It already holds a number of crypto registrations within the bloc, including under the relatively well-developed and MiCA-like regime in France.
“There are now clear rules of the game for crypto exchanges to operate in the EU,” Binance CEO Changpeng Zhao tweeted in response to the vote. “We’re ready to make adjustments to our business over the next 12-18 months to be in a position of full compliance.”
But, Zhao also said, “The fine details will matter.”
While the overarching MiCA law, known as a “level one” text, is now nailed down, EU agencies such as the European Securities and Markets Authority say they will have to draft and consult on the “substantial package of implementing measures” that lie underneath.
Crypto industry players will be watching closely.
“There are a lot of things that the MiCA level one text does not define – there are questions that will be answered in the so-called level two legislation,” Tommaso Astazi, head of regulatory affairs at lobby group Blockchain for Europe, said at an event in Brussels last month.
There were last-minute disputes among lawmakers and governments on how the law should treat NFTs and decentralized finance, and hastily drafted compromise language may not always be clear about, for example, what is or isn’t an non-fungible token or a decentralized grouping.
While the EU law sets a common standard, it will be enforced by individual national regulators in the bloc’s 27 member states, and some are concerned that countries could impose extra hurdles or in the other direction undercut each other in a bid to attract business.
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,” as well as making a smooth transition from existing national regimes, Mark Jennings, head of European operations at crypto exchange Kraken, wrote in an email sent ahead of the vote.
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.
CORRECTION (April 21, 11:29 UTC): Corrects Antoni Trenchev's job title.
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