It has taken more than two years for the new European regulations for cryptocurrencies — dubbed “MiCA” — to be adopted, and some MEPs such as Ernst Ortason (Grenz), co-rapporteur of the Committee on Economic and Monetary Affairs on cryptocurrency transfer assets, have raised “the end of The Wild West of Cryptocurrency.” In this column for Forbes France, Janet Hu, Head of Policy (Europe) at Chainalysis, explains the new rules that will be imposed on cryptocurrency trading by 2024.
Last month (April 20), the European Parliament adopted the MiCA (Markets in Crypto Assets Regulation), the first framework for crypto assets that introduces new basic requirements in all aspects of prudentiality, market integrity and consumer protection. With the MiCA regulation, crypto-asset regulation in the European Union (EU) will no longer focus solely on combating money laundering and terrorist financing.
The new frameworks provided by this regulation
Although the legislative process is coming to a close some two and a half years after the MiCA regulation was first proposed by the committee, there is still a long way to go. Al-Qaeda mica It will be published in Official Journal of the European Union in June and will enter into force in July this year. From there, certain rules will apply over the next 12 to 18 months. Stablecoin requirements will first be implemented in July 2024, while the rest of the MiCA regulation will be implemented in January 2025.
The proposals adopted are basically the same as those that appeared in the text of the interim political agreement last June, except for language and legal changes. In short, the main requirements relate to the obligation of companies issuing crypto assets or stable currencies to issue a technical document containing information on their mode of operation, rights and obligations, capital, risks, or even advertising messages.
In addition, Crypto Asset Service Providers (CASPs) intending to serve EU clients will need to obtain a license from the relevant national authorities before carrying out their activity. They will also need to have a physical office within the European Union but also comply with numerous regulations around governance and minimum capital requirements.
Next steps in legislation
Going forward, the European Banking Authority (EBA/EBA) and the European Securities and Markets Authority (ESMA/ESMA) are responsible for finalizing certain regulatory technical standards (commonly called a “Level 2 text”) as well as guidance before they are implemented.
In particular, the EBA will have to provide more operational details on the operation of stablecoins – tokens that refer to one or more of the assets (ART) and electronic money (EMT) tokens mentioned in the MiCA regulation. Prompt consultation on these terms will be essential for the proper functioning of these regulations, especially since the provisions relating to stablecoins are among the strictest and have sparked many discussions during the negotiations.
On May 17, EBA Public consultation In order to trade on stablecoin benchmarks that are “significantly significant” – i.e. stablecoins with a large client base, high market capitalization or large number of transactions. In the MiCA regulation, EBA will have a new mandate to perform supervisory functions (such as on-site inspections) for important stablecoin issuers.
It will be necessary for the EBA to continue these discussions, including how the stablecoin transaction cap will work. The same applies to ESMA in terms of its licensing process and important crypto-asset service providers. In fact, the criteria that define the service provider on crypto-assets of great importance (with an average daily number of more than 15 million active users over the year), and the requirements in terms of environment and sustainable development, are necessary to clarify the market players who intend to operate in the European Union, and comply with the rules.
The beginning of a new era?
Although MiCA still takes time to implement, some governments are already starting to think about what form MiCA 2.0 could take. This is in particular to address some outstanding issues during the negotiation phase, such as DeFi (Decentralized Finance), which is currently being excluded from regulation.
For example, in France, ACPR I recently identified a number of potential regulatory scenarios for DeFi. In particular, the discussion paper notes that “when a decentralized service claims to create or use a crypto asset that has an official currency as a reference,” that crypto asset should be considered an EMT within the meaning of MiCA and subject to future regulation.
Regulation of crypto assets is still a long way off and more hurdles may arise. However, Europe remains a world leader in cryptocurrency regulation and has certainly provided clarity to companies on how to proceed in this market. With MiCA, organizations will no longer have to move between 27 different organizational systems.