Europe has been at the forefront of crypto regulation around the world. The European Parliament today approved ‘Crypto Asset Markets’, better known as MiCA.

The “Wild West” of the crypto world, as described by some MEPs, will now have laws that will provide legal certainty, seek to give more confidence to companies in the industry, and establish a set of rules to prevent abuses. .

The Bitcoin boom has made clear the need for massive Regulation. In 2020, the European Commission published its first text. Now, three years later, Parliament has approved the final text of the ‘European Regulation on crypto-asset markets. But it all started earlier, with the Bitcoin boom in 2017, European institutions understood the importance of cryptocurrencies.

After the text is approved, it is expected to be published in the Official Journal of the European Union in the coming weeks. There will be a margin of 12 to 18 months for some new provisions to apply. So we won’t see the full effects of MiCA until the beginning of 2025.

Define what krypton is. One of the problems is that the concept of cryptocurrencies is very complex and we also have multiple entities and mechanisms. The new Regulation sought to define this. This is the definition of a crypto asset according to MiCA:

“A digital representation of value or rights that can be transferred and stored electronically using decentralized ledger technology or similar technology”

Inside there is already a difference between cryptocurrencies, stablecoins or tokens. Activities such as “oversight and administration, operation of a trading or clearing platform, execution, advice and consultation” are also defined.

Trying to avoid cases like FTX. Stefan Berger, one of the Members of the European Parliament who implemented this arrangement, explains that MiCA wants to “restore the trust damaged by the FTX case”. Precisely this regulation imposes a set of responsibilities to avoid potential corruption cases like that of FTX. “Most applications seen with FTX will not be allowed.”

One of the obligations of service providers is to have effective procedures for the detection, management and disclosure of potential conflicts of interest. They will also need to have effective complaints-handling procedures.

If Europe detects risks, it can intervene. Creates a MiCA figure ‘Crypto asset service providers (CASP). These providers can be intervened if operational hazards are identified by the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA).

The text establishes specific anti-corruption rules to regulate that crypto assets are not used to finance terrorism or money laundering. The environmental transparency requirements that will be required for the largest exchanges are also determined.

One of the advantages of these providers is that they will not need the permission of every European Union country to work, but a community registration is enabled. Some exchanges such as Coinbase, Gemini or more recently Kraken have already been authorized.

Tokens and DeFi are excluded. Not all cryptos will be subject to European regulations or need to be registered to meet requirements.

MiCA will not apply to crypto assets offered for free. Nor are “crypto assets that are unique and cannot be exchanged for other crypto assets, including digital art and collectibles”. In other words, NFTS will not be included unless they act as “service access keys”. From the firm specializing in blockchain and crypto ATH21, they explain that “any prior analysis will be required before the asset in question can be excluded from MiCA.”

The law will not cover transactions of less than EUR 1,000 from cold wallets or transactions between persons acting on their own behalf without the intervention of any provider. So DeFi is also outside the scope of MiCA.

Margin for the ECB to create the cryptocurrency. MiCA also does not require the same CBDCs, which are virtual currencies created by central banks. The European Central Bank’s decision to create its own stablecoin in the coming years may be seen in the blink of an eye.

The crypto industry applauds MiCA. Unlike the US, Europe has given crypto companies a pretty clear picture of what it intends to allow and what it does not allow, leaving some space.

It is well received from the crypto industry. Javier García de la Torre, Director of Binance Spain and Portugal, said, “The regulatory environment has advanced and this is a positive thing for users and the industry. MiCA will bring regulatory clarity to one of the world’s largest markets. Overall, I believe this is a pragmatic solution to the challenges facing the industry. we believe.”

Bit2Me Chief Compliance Officer Joâo Augusto Teixeira explains that “one of the aims of this new MiCa Regulation is to protect the consumer and investor, and takes measures to prevent market abuse and situations that affect the integrity of the market.”

Crypto remains regulated, but several steps below other financial assets. Europe has taken the first step to curb cryptocurrencies, but it could be much more stringent. “It’s not a stabilizing ointment. It doesn’t eliminate risks and it won’t be instantaneous,” says Rodrigo Buenaventura, chairman of the National Securities Market Commission (CNMV).

“MICA is a miniature version of MiFID. It covers all the topics, but regulates them one, two or three steps below the demand level for regulated financial assets. It will be necessary to continue the warning that they are products with less protection mechanisms.”

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