Regulators and industry players highlighted several implications and potential impacts of the European Union’s Markets in Crypto-Assets (MiCA) regulation at the Paris Blockchain Week 2023.
A panel titled “MiCA: How is the EU Regulating Crypto?” delved into the proposed MiCA regulation, which is expected to take effect in 2024. The 400-page regulatory guidelines for cryptocurrencies and digital assets have been a major talking point across the continent.
Gundars Ostrovskis gave inside insights into the development of the MiCA documentation, given his involvement as a team leader in the Digital Finance Unit of the European Commission. Working alongside colleagues that drafted the MiCA regulations, Ostrovskis highlighted the belief that the legislation would be of benefit to companies and users in the cryptocurrency ecosystem:
“We clearly expect it to be helpful in terms of strengthening the industry by giving regulatory certainty, this is one of the things that is important for businesses strategic planning, and protecting customers of the industry while ensuring market integrity.”
MiCA has been in development for a couple of years, involving conversations with various countries and industry players. Ostrovskis highlighted that the implementation of MiCA would require adjustments in states where regulatory frameworks for the cryptocurrency industry already exist.
Related: European Parliament Committee passes MiCA crypto framework in landslide vote
Janet Ho, head of EU policy at Chainalysis, believes that the success of MiCA will be dependent on a number of factors. Firstly, a sufficient understanding of the requirements of the legislation will be required, followed by robust feedback and reworking of certain parts of the documentation:
“Legislation is not a static process. There’s not always a perfect piece of regulation. We know there will be reviews and improvements.”
Ho suggested that the European Commission should review the implementation of obligations, and consider feedback from government supervisors and industry participants, and the initial impact of MiCA.
Hubert de Vauplane, a partner at law firm Kramer Levin Naftalis & Frankel, also provided food for thought as an adviser to European and French lawmakers on a variety of areas, including fintech, economics and digital payments.
De Vauplane was particularly concerned about the impact of MiCA on existing cryptocurrency and Web3 regulations in specific countries in the European Union:
“Some countries like France have local regulation. It is important to keep in mind that those regulations will disappear, potentially entirely.”
De Vauplane also said that newer industry phenomena like nonfungible tokens (NFTs), and decentralized finance (DeFi) products and platforms that are not currently included in the MiCA documentation might well continue to fall under the purview of country-specific laws:
“That means that there is no space for local regulation, which is covered by MiCA, specifically for the definition of digital assets.”
Nadia Filali, Caisse des Dépôts Group’s blockchain program director, stressed the importance of governments, regulators and industry participants working together, highlighting the development of regulation in France as an example:
“For me the regulation is something that could help innovation and could help the popularity of the technology.”
Ostrovskis remained convinced that the European Commission has provided a good balance of regulatory parameters for certain aspects of the cryptocurrency ecosystem while leaving other areas more open to unencumbered development:
“That will provide a sound regulatory framework for many activities in the crypto asset ecosystem while we also have this centralized finance (CeFi) space, which will, to some extent, remain unregulated.”
Ostrovskis stressed that CeFi and DeFi are areas in which the European Commission wants to foster innovation, allowing for new ideas to be tested as the space develops:
“These activities are still of a limited scale, which also has some characteristics that allow us to, let’s say, leave it on its own for the time being before it possibly endangers financial stability.”
A final vote on the European Union’s MiCA regulation is set for April 2023. The anticipated final decision on the legislation was deferred in January 2023 due to technical issues relating to the translation of the document into the 24 official languages of the European Union.
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