MiCA: Is order created in the Wild West of the crypto world?

The European Union’s Regulation on Crypto Asset Markets (MiCA) could prove transformative for the 500 million consumers in 27 territories.

the June 30, 2022, the Council of Europe has reached an agreement on the regulation of crypto-asset markets (MiCA), becoming the first international entity to integrate crypto-assets, issuers of crypto-assets and service providers of crypto-assets. crypto-assets within a regulatory framework. MiCA covers any type of market abuse related to any type of transaction or service, including market manipulation and insider trading. It will also force stablecoin issuers to build a sufficiently liquid reserve, with the aim of a more transparent and robust market in which customers are better protected.

Remember that most stablecoins are cryptocurrencies pegged to the value of other assets such as gold or the US dollar. But suppose you have a gold-pegged stablecoin, and it has to be redeemable at any time at the purchase price, that’s impossible, no one will issue such a token. Those who passed the law should have just been honest and said we’ll ban anything like it, instead of making it nearly impossible to launch. On the other hand it will avoid shipwrecks like TerraUSD which was supposed to be worth $1, but its value dropped from May 2022 trading at around 3 cents in October 2022!!

MICA

Mica (380 pages) has just been adopted by the European Council at the end of 2022 and should enter into force at the end of 2023 or the beginning of 2024. Legal certainty is one of the main reasons why nations need the MiCA. Once enacted, the bill will likely have a massive impact on the crypto market due to its broad reach. Indeed it covers the many areas it addresses include the prevention of money laundering, consumer protection, liability of crypto companies, the environmental impact of the industry and stablecoins. The European regulation lays the groundwork for what could be a new era in the operations of major crypto entities. The bill will still have to be approved by the European Parliament, a vote is scheduled for October 10.

Under MiCA, cryptocurrencies have been categorized into three different types:

  • “Utility tokens”, are issued for non-financial purposes to digitally provide access to an application, services or resources available on blockchain networks
  • Asset-referenced tokens (ART) that maintain stable value by referencing multiple legal tender currencies, one or more commodities, one or more cryptoassets, or a basket of such assets.
  • “E-money tokens” (EMTs) are crypto assets with stable value based on a single fiat currency that aim to function similarly to electronic money.

Crypto entities will have up to 18 months to prepare for the changes, as the bill is expected to take effect in 2024. Is order being created in the Wild West of the crypto world? Anyway the overall feeling is that the industry seems to agree with his positive assessment.

Regulation

In English-speaking countries, regulation is seen as both a challenge and an opportunity. The potential new rules could rethink market dynamics, participants also expect them to boost competition and market transparency and volumes.

But the crypto community will have to “grow” and consider legal compliance as it develops projects. And this is perhaps the major obstacle, innovating when more than 200 other countries have no regulation, including the bloc of Anglo-Saxon countries US, UK, Australia in the lead and Asian countries with China and India. In fact Europe has made a huge walled garden, an environment that controls user access to network-based content and services. Indeed, this “enclosed garden” will guide the user’s browsing in particular areas to allow access to a selection of services or prevent access to other services.

European legislators have not quite achieved their legal vision for everyone, in particular in the new areas of Web3 technology (NFT, metaverse, etc.) which is developing very quickly, particularly in the US, massively supported by certain funds of investment. EU governments wanted NFTs to be entirely exempt from the regulation, but European Parliament lawmakers argued that in reality many so-called NFTs in the market were in fact traded as financial products and capable of similar types of mis-selling and market abuse.

The current legal compromise means that all assets issued as part of a series will likely be considered fungible, which means that in practice the bulk of self-proclaimed NFTs will be covered by regulation. Worse still, it could mean that national law enforcement officials could have conflicting opinions on whether a particular asset should issue a white paper.

If Mica has influence in the world on other ongoing regulations, then perhaps this standard will become global, a European MiCA that becomes a global MiCA. Binance CEO Zhao says the proposed EU crypto rules are fantastic, but strict.



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MiCA: Is order created in the Wild West of the crypto world?


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