MiCA can make Europe a digital asset hub under the EU’s new crypto law.
The European Union has signed into law the Markets in Crypto-Assets (MiCA) regulations, which will provide regulatory guidance on crypto assets and service providers. The EU’s regulatory package, first drafted in 2020, will govern the issuance and scope of services related to the cryptocurrency market. The MiCA regulations were passed by the European Parliament on April 20 and subsequently approved by the European Council on May 31. The legislation defines a crypto asset as “a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology.” MiCA establishes standards for crypto asset service providers (CASPs) and cryptocurrency asset issuers. Stablecoin service providers will be required to provide a white paper that contains key details about the product and the key players involved in the business. The regulations do not cover nonfungible tokens (NFTs) or crypto assets already recognized as financial instruments under current law. The passing of MiCA regulations into law, nearly two years after they were first proposed, provides regulatory clarity for cryptocurrency businesses in Europe.
Zhao’s comments are in response to the lawsuit recently filed by the U.S. Securities and Exchange Commission against Binance and its CEO, accusing them of violating securities laws.
Kadan Stadelmann, the Chief Technology Officer at Kodomo, an open-source blockchain technology firm, said that while there may be debate about the effectiveness of MiCA, it is undeniable that it sets the foundation for global crypto regulation:
“Other countries will likely take a ‘wait and see’ approach before creating their own regulations. However, MiCA’s influence is clear; most nations will feel pressure to adopt some form of regulation to avoid being left behind in a sector that is increasingly important.”
Alex Shevchenko, the CEO of layer-2 platform Aurora Labs, said that implementing MiCA could “potentially influence policymakers and regulators in the U.S. to consider similar approaches, striking a balance between consumer protection and market development. As a result, this may lead to increased collaboration and harmonization efforts between jurisdictions.”
Members of the U.S. House Financial Services Committee are currently working on a draft bill that aims to establish clearer laws for certain types of cryptocurrencies and bring stablecoins under the regulatory purview of the Federal Reserve.
Crypto legislation around the globe
While MiCA is currently the only regulatory framework that will govern certain crypto activities in 27 countries, several jurisdictions have been actively developing some form of crypto legislation in recent years.
Joey Garcia, the head of regulatory affairs at Xapo Bank, said that the MiCA framework is often only compared to the regulatory landscape in the U.S., which, in his view, is far too narrow a comparison in the context of the global, cross-border, and digital industry:
“There are many other jurisdictions. Singapore’s crypto regulations are extremely advanced, and Hong Kong’s new framework took effect on June 1. Smaller jurisdictions like Gibraltar have been regulating this space since 2018, developing frameworks and guidelines around critical factors such as market integrity for crypto trading platforms, which is far more comprehensive than MiCA.”
Garcia said that the rest of the world could learn from MiCA, specifically how to adapt classic financial services principles to nascent crypto technology. He adds that regulators outside the EU “will also need to learn and develop their understanding in not only implementing standards, but also subsequently being able to actively monitor and supervise those businesses.”
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MiCA’s approval comes as Hong Kong positions itself as a regional crypto hub, making way for independent legislation separate from China’s blanket ban approach.
Stadelmann added that Hong Kong definitely has the potential to become an even larger crypto hot spot than Europe. Before China banned crypto-related businesses in 2021, “Hong Kong was previously home to several growing crypto startups. With greater regulatory certainty in 2023, I think more crypto startups will start considering Hong Kong as a viable option,” he said.
