…Researched and contributed by Jack Sylva.
The European Parliament has passed the Markets in Crypto-Assets (MiCA) regulation, which seeks to provide a regulatory framework for the crypto industry across EU member states.
Prior to MiCA, crypto companies had to comply with 27 different regulatory frameworks across EU member states, which was costly and burdensome.
Under MiCA, EU-wide regulations will apply, enabling companies to operate throughout the entire EU crypto market with a MiCA license granted in one country.
This will increase the competitiveness of EU startups and may result in them gaining market share from unregulated competitors.
MiCA will foster innovation and attract foreign capital and talent
MiCA could encourage more institutional adoption and activity in the EU crypto and blockchain market.
It will enable European crypto firms to scale and grow faster, allowing licensed companies to offer their services throughout the world’s largest single market, with roughly 450 million people.
Additionally, MiCA will foster innovation amongst financial institutions that have been hesitant to launch products and services due to regulatory uncertainty.
Moreover, as MiCA is the first comprehensive regulatory framework for crypto assets from a major jurisdiction in the world, it is likely to attract considerable foreign capital and talent to the region.
NFT and DeFi Regulation Unavoidable
MiCA is the EU’s first step towards regulating the crypto industry, and it provides a reliable framework that builds trust through legal certainty.
The regulation includes a uniform classification of assets and the requirement for coin issuers to provide a white paper that discloses all relevant information about the coins, such as their energy consumption and environmental impact.
MiCA will ensure that every new token is reviewed for approval to check that the business model does not threaten the stability of the cryptocurrency, which creates more transparency for investors.
While the new regulation will only address crypto-asset service providers that offer services for NFTs, Moritz Schildt, a board member of the Hanseatic Blockchain Institute and the German Blockchain Association, expects further regulations on NFTs relatively soon.
MiCA Regulation is a Significant Development for the Crypto Industry
The success of the first step toward regulation — MiCA — could provide a significant boost to both EU crypto businesses and the EU economy as a whole.
However, the practical implementation standards developed in the future will determine whether this success is realized.
EU regulators will develop these standards over the next 12 to 18 months, and “the practical success of MiCA will largely depend on this implementation work — also referred to as Level 2 legislation.”
Beyond MiCA, EU institutions are finalizing a new Anti-Money Laundering (AML) rulebook that will be critical for crypto firms.
The European Commission will also publish a detailed report on DeFi in about 18 months and may take further legislative steps to regulate the space.