Following more than two years of intensive work, the crypto industry and the EU policymakers can jointly breathe a sigh of relief as the 20th of April marked the final Plenary vote of the Markets in Crypto-Assets Regulation or “MiCA”.
Implementing these new rules will provide much-needed clarity for all the crypto projects that target the EU market or want to do so in the future. The European Crypto Initiative (EUCI) welcomes this vital landmark.
“Not many people know the story of EUCI and how our organisation started as a reaction to the Commission’s legislative proposal on MiCA. Back then, I read it, and I jumped on a call with Marina Markezic and Florian Glatz, who were heading the local blockchain organisations in their home countries.
We decided right away that we needed to get involved in the process and help shape the regulation in a way that would accommodate the particularities of the industry. So now it felt incredible to observe the final discussions around MiCA in Plenary and then the text getting voted after all this time,” shared Simon Polrot, co-founder and President of EUCI.
MiCA’s Effects Are Already ObservableEven before the publication of MiCA’s text in the Official Journal of the European Union (OJEU) at the end of June, which will bring the application of the regulation a step forward, EUCI has already started to observe its practical effects.
“We are in a beneficial position of having a broader overview of the developments across the whole of the EU, meaning that we already observe the day-to-day differences on a member-state level caused by MiCA,” shares Marina Markezic, EUCI’s co-founder and Operational Manager.
Markezic continues to say:
“We now see enthusiasm within the industry that was missing in previous years - it is caused, on the one hand, by the expected legal clarity that will follow from MiCA’s application, but on the other, some member-states that previously didn’t enjoy much interest from crypto projects might have a chance to prepare for MiCA’s implementation and become desirable destinations for CASPs licensing activities almost overnight.”
EUCI reached out to experts from member states who shared their observations:
In Italy:For a wide range of tokens that are not financial instruments, MiCA will exclude the application of national rules on financial products and prospectus obligations that scope more use cases than MiFID II prescribes.
According to Francesco Paolo Patti, a Law Professor at Bocconi University and European Law Institute Council Member, MiCA will allow Italian start-ups to launch crypto-asset-related projects according to precise rules.
Further, it will enable the implementation of organisational and prudential requirements currently unknown to Italian CASPs. It will also put these service providers under the control of independent national authorities. The establishment of the Italian CASP register has been the first regulatory step, and MiCA will now provide a comprehensive legal framework and the establishment of new compliance practices.
In France:The industry and the trade associations are cautious about the 18-month period during which many implementing measures will be developed - the so-called “Level 2” texts.
According to William O’Rorke, Partner at ORWL Avocats, MiCA’s adoption is welcomed by the French crypto asset industry as the applicable regulation in the country is already strong. More than 70 actors registered are registered as DASPs, and an approval procedure (similar to MiCA) has existed in France since 2020.
MiCA Has Been Approved; Now What?“Opposite to popular belief, the work on a regulation only begins with its final vote,” shares Florian Glatz, another one of MiCA’s co-founders, “as this milestone and the subsequent OJEU publication only pave the way for the actual work in defining and applying the adopted rules.”
Defining and applying MiCA would be achieved through the so-called Level 2 measures that European Supervisory Authorities (ESAs) must develop within a specific period following the Regulation’s publication in the OJEU. In a nutshell, these are supplementing measures delegated to said authorities to clarify further how the legislation will be implemented.
In the case of MiCA, the competent authorities are the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the European Commission. The topics these agencies have to clarify include distinguishing between crypto assets under MiCA and financial instruments under MiFID II. There are deadlines for those Level 2 acts under MiCA, ranging from 12 to 18 months after the regulation’s application date.
The International SceneInternational standard-setting bodies such as IOSCO, an association of national securities regulators, and the Financial Stability Board (FSB) will also have an important role to play in shaping and developing common principles for regulating the sector at a global level. This includes significant work on areas such as DeFi, which policymakers are still trying to wrap their heads around.
“Ever since the finalisation of trilogue negotiations on MiCA in Autumn 2022, our attention has shifted primarily to the work done by international standard-setting bodies such as FSB and IOSCO. Their insights and reports will influence future MiCA reviews, but also the development of crypto regulations in other jurisdictions,” adds Polrot.
Examples of international bodies’ publication roadmaps include IOSCO’s work on crypto and digital assets, which will be led by the UK Financial Conduct Authority (FCA) and is expected to conclude towards the end of 2023. The US Securities and Exchange Commission (SEC) will oversee IOSCO’s decentralised finance working group that is expected to publish a report on DeFi at the end of the year, which will also contain specific policy recommendations.
Is MiCA II Coming?According to Glatz:
“As much as we’d like to say that the work on regulating the crypto asset industry in the EU is done, there are plenty of indications that the second iteration of MiCA could become a reality very soon.”
His words are further supported by Commissioner McGuinness’ statement during the Plenary debate on the 19th of April that the Commission could accompany its first evaluation report for MiCA, due 18 months after it enters into force, with a legislative proposal reviewing MiCA’s scope. MiCA II is expected to address DeFi, lending and staking, NFTs, and crypto-assets with no identifiable issuer.
MiCA’s International ImpactWhen asked about MiCA’s expected influence on an international level, Markezic shares that no other jurisdiction will have as much clarity as the EU. “It’s easy to imagine that other jurisdictions will be significantly influenced by MiCA’s effect”, says Markezic, adding that this trend is already observable in the UK through their current work on regulating crypto assets.
"In any case, EUCI will continue following all upcoming EU regulations affecting crypto and will work towards shaping them as much as possible in a way that benefits the industry and the European economy as a whole while at the same time providing consumers with the necessary trust and protection - just as we’ve been doing for years," concludes Markezic.
The European Crypto Initiative (EUCI) is a Brussels-based advocacy organisation that aims to shape EU regulations to favour open, permissionless and decentralised applications that leverage blockchain technology. EUCI’s work is supported by the Ethereum Foundation, Maker DAO and the Interchain Foundation.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
