Regulators and industry players highlighted a number of 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 guideline for cryptocurrencies and digital assets has 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 will 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 and has involved conversations with various countries as well as industry players. Ostrovskis highlighted that the implementation of MiCA will require adjustments in states where regulatory frameworks for the cryptocurrency industry already exist.
Janet Ho, head of EU policy at Chainalysis, believes that the success of MiCA will be dependent on a number of factors. Firstly, 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 considering feedback from government supervisors and industry participants and the initial impact of MiCA.
Hubert de Vauplane, partner at law firm Kramer Levin Naftalis & Frankel LLP, also provided food for though as an advisor to European and French lawmakers on a variety of areas including FinTech, economic and digital payment.
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.”
Hubert noted that newer industry phenomenon like nonfungible tokens (NFTs) and DeFi products and platforms that are not currently included in the MiCA documentation may 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’s 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 EU 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 is an area 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 allows 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 Jan. 2023, due to technical issues relating to the translation of the document into the 24 official languages of the EU.