Regulation
Get ready for a bumpy ride
Key EU regulation for cryptocurrencies will come into force within the week – and it doesn’t appear that any major specialist players have managed to get permission.
The new regime gives operators such as exchanges and wallet providers the chance to apply for a license that will allow them to operate across the bloc.
Brussels has boasted of being the first global jurisdiction to establish rules tailored to the cryptocurrency market, a market that has seen considerable turbulence and manipulation.
But, with the clock ticking, the jury is still out on whether Europe’s Crypto Asset Markets Act, MiCA, heralds a new era for the industry – or will kill it dead.
After passing the law in June 2023, French Finance Minister Bruno Le Maire said the landmark legislation “will prevent the misuse of crypto-assets, while being conducive to innovation to maintain the attractiveness of the EU.”
A few months later, MP Stefan Berger (Germany/European People’s Party) said that the rules “place the European Union at the forefront of the global token economy.”
Many cryptocurrency users have long rejoiced in its freedom from government control, although some acknowledge that regulatory recognition could offer greater credibility and certainty.
As the prospect of financial regulation looms ever closer, the mood in the industry grows more anxious.
Difficult and uncomfortable
“It’s a difficult and uncomfortable time,” Faustine Fleuret, president of the French cryptocurrency lobby group ADAN, told Euronews, citing tough and unclear rules.
This sadness is shared by Marina Markezic, founder of the Brussels-based European Crypto Initiative, who points out that many cryptocurrency companies have not yet told their customers exactly how the law will work.
On June 3, Binance, one of the world’s leading cryptocurrency exchanges, said it will restrict access to unauthorized crypto coins once MiCA takes effect, but others have not been so frank, it said.
“June 30 is one week away and I, as a consumer, still don’t know what will happen,” Markezic said.
A large chunk of MiCA is dedicated to stablecoins: cryptocurrencies that seek to peg their value to other assets, such as the price of gold or the US dollar.
These are the most difficult parts of MiCA and the first to come into force: other provisions, such as trading licenses, will come into force on 30 December.
But there’s still discussion about what the rules actually mean – for example, whether dealing with stablecoins means having to register as a payment service provider, Fleuret says.
Short notice
Worse, Fleuret says, the European Banking Authority (EBA) published its final set of technical standards only last week, giving traders little chance to prepare.
“Less than two weeks before a big, big, brick of the MiCA regulation comes into force, the people who have to comply didn’t even have all the operational details needed to comply,” he said.
“For newcomers it will be much more complicated, perhaps impossible, to be ready by June 30,” he explained, although he admits that existing payment providers may be in a better position.
An EBA spokesperson told Euronews that the EU agency had finalized and published all 18 sets of standards and guidelines ahead of the June 30 deadline.
“The EBA called on the industry to prepare promptly” for the new stablecoin regime and offered a tool for companies to resolve interpretive questions, the spokesperson added.
No approval?
Confirming Fleuret’s analysis, Euronews has not identified any major cryptocurrency players that have been definitively approved by MiCA.
In April, Paolo Ardoino, CEO of stablecoin issuer Tether, said he was “still discussing with the regulator” his concerns about the law. Circle, whose euro-backed stablecoin appears aimed at EU users, announced last year that it had applied for a MiCA license.
With a week to go, neither company has publicly announced that it has won regulatory approval; neither responded to Euronews’ request for comment.
Both Markezic and Fleuret are still positive about some aspects of MiCA, which in particular will allow crypto companies to operate across Europe with a more or less clear framework.
But Fleuret fears the law isn’t suited to smaller players who tend to dominate the space.
“The problem with MiCA is that it is not proportionate,” he said. “If you are a startup looking to launch a market business right now, you should apply the same rules as Société Générale,” a French bank that is also venturing into financial technology.
And, for all the EU’s bluster about promoting innovation, difficult hurdles seem like a feature rather than a bug.
Big technological fears
Those who created MiCA were motivated in part by fears that Facebook might issue its own form of currency, Libra, tied to a basket of major world currencies.
Finance ministers have railed against the idea of a major foreign tech giant creating a currency that could supplant the euro.
Facebook’s project collapsed, partly due to political backlash, but regulators’ fears were confirmed in spring 2023, when Terra, a stablecoin that supposedly held its value against the US dollar, collapsed under market pressure , causing much of the crypto ecosystem to collapse. with it.
The final version of MiCA imposes strict reserve requirements on euro-based stablecoins and a maximum limit of one million daily transactions for others.
But this could be to the detriment of existing agreements, as operators do not always monitor such information, Markezic says.
“Emissions happen globally and before there was no system on how to align, set up or review… how much is emitted within a specific jurisdiction,” he said. “Sometimes issuers don’t know who holds these tokens.”
Some difficult years
Cryptocurrencies have had a rough few years. Following the Moon incident came a period of turbulence and regulatory backlash, and many of the industry’s figureheads are now in prison.
In the United States, Sam Bankman-Fried was recently sentenced to 25 years after pleading not guilty to fraud and money laundering during his time running cryptocurrency exchange FTX.
Likewise Changpeng Zhao, the founder of Binance, was sentenced to four months after pleading guilty to money laundering.
All this may have tarnished the reputation of cryptocurrencies, but Markezic is confident that legal credibility could herald a new era.
Established providers like banks “are waiting for regulation,” he said, with a clear regulation that potentially takes the technology out of its current, slightly nerdy niche.
“I think we’ll talk less about the technology and less about the stablecoins and … more about the utility and what it can bring to the consumer,” he said. “The benefits are numerous when it comes to seamless transactions, 24/7 processes, etc.”
But even she acknowledges that there will be bumps in the road from today’s Wild West to mainstream credibility.
“Many companies will not have the ability to be compliant,” he said. “Very small startups and innovative companies will likely limit their activities in the EU.”