Regulation
Regulation Increases Demand for Crypto Surveillance: Report
Classified: Cryptocurrency, The flow | Tags: Sharpen, compliance, cryptocurrency, Event, Not, regulation, relationship, surveillance
Posted by Colin Lambert. Last updated: June 28, 2024
A new study from Acuiti finds that the European Union’s Markets in Crypto Assets (MiCA) regulation will increase investment in surveillance systems for cryptocurrency trading.
The report, commissioned for Eventus, a company that, unsurprisingly, specializes in surveillance software and services, was based on 68 interviews with cryptocurrency industry executives and found that, of the companies that fell within the scope of MiCA, only 9% were fully prepared, and a quarter of companies had not yet begun preparations. With MiCA set to come into force at the end of the year, it is important for companies to identify whether they are within the scope now and begin preparations to comply, Acuiti says.
In terms of market surveillance, the MiCA regulation builds on the requirements set out in the EU’s Market Abuse Regulation (MAR), explains Acuiti. For many companies, particularly crypto-native ones entering the space for the first time, he says there will be a significant operational effort to put in place the systems required to be compliant. He adds that the study found that there were still high levels of companies that were unsure whether they were in scope.
That said, the cryptocurrency market is already becoming more sophisticated in terms of market surveillance, as the report found that companies in the market, including 57% of those considered to be outside the scope of MiCA, already had market surveillance systems in place.
With consultations still ongoing on the final technical standards, a quarter of those affected had not yet started preparation. Just under a third were in an early stage of preparation, while just over a third were in an advanced stage, Acuiti says. Companies investing in new systems were typically considering outsourcing to a third-party software provider, with 64% planning to do so, although many companies anticipated challenges in finding the right vendor for their needs.
Of all the challenges that MiCA posed to companies entering the scope, the report finds that compliance costs and finding qualified personnel were the key factors that companies predicted would cause them problems.
“For companies not already operating under MIFID II, MiCA will represent a significant operational step towards becoming compliant, and unsurprisingly we found that companies were looking to third-party providers to assist them with their preparations,” he says Ross Head of Lancaster Research at Acuiti. “There is a relative lack of awareness in some areas of the market about who is in scope, which will need to be addressed if companies are to have time to prepare for compliance.”
Eventus CEO Travis Schwab adds: “While there are commonalities in trade surveillance across asset classes, digital assets can present some unique challenges. We have invested significantly several years ago to ensure we can meet the needs of this industry, including the ability to handle the generation of real-time alerts covering billions of messages per day, 24/7. Regulation in the EU is just the beginning of the new regulatory guidance we expect to see in jurisdictions around the world in the coming years.”