Apr 21, 2023

EU Passes MiCA Regulation to Increase Crypto Industry Competitiveness

The European Union recently passed the Markets in Crypto-Assets (MiCA) regulation, a major legislative proposal to oversee the crypto industry in its member countries. With MiCA, EU-wide regulations will apply, allowing companies to operate throughout the entire EU crypto market with a MiCA license granted in one country. This will increase the competitiveness of EU startups and may result in them gaining market share from unregulated competitors.

The MiCA regulation is a significant development for the crypto industry in the European Union. Prior to MiCA, crypto companies had to comply with 27 different regulatory frameworks across the EU member states, with Germany or France being costly and burdensome, for example.

MiCA will increase the EU’s competitiveness

Patrick Hansen, director of EU strategy and policy at stablecoin issuer Circle, told Cointelegraph that MiCA will enable European crypto firms to scale and grow faster, allowing licensed companies to offer their services throughout the world’s largest single market, with roughly 450 million people.

The legal clarity of MiCA will also foster innovation amongst financial institutions that have been previously hesitant to launch products and services due to regulatory uncertainty. Additionally, as MiCA is the first comprehensive regulatory framework for crypto assets from a major jurisdiction in the world, it is likely to attract considerable foreign capital and talent to the region.

Moritz Schildt, a board member of the Hanseatic Blockchain Institute and the German Blockchain Association, noted that MiCA will come into force already this year, giving the EU a chance to provide a unified regulatory framework for crypto assets and related providers.

Peter Grosskopf, co-founder of decentralized finance (DeFi) project Unstoppable Finance, is also convinced that MiCA will benefit the EU crypto and blockchain market. First, companies from outside Europe will have to register with a company in the EU, so there is a “direct impact on job creation and tax payments.”

Second, many jurisdictions take an overly strict approach to regulating crypto. For example, “the U.S. does regulation by enforcement.” Compared with other regions, the EU will become “a safe space for the industry as a whole, and innovators from around the world will start to build their businesses here,” Grosskopf said.

MiCA will ensure that every new token is reviewed for approval to check that the business model does not threaten the stability of the cryptocurrency, which creates more transparency for investors.

But the crypto and blockchain sector is constantly evolving. Stefan Berger, the European Union Parliament rapporteur for MiCA, noted that tokenization is not hype and will become an integral part of our lives and financial world. More and more business models are emerging based on nonfungible tokens (NFTs), for example, which have been largely exempt from MiCA.

Berger further noted that NFTs are next on the docket, with European lawmakers looking at what type of regulation would benefit the industry and consumers. Moritz Schildt also expects further regulations on NFTs relatively soon. “We should reconsider the traditional classification of investment products.” According to the expert, in the future, investments “that were previously considered ‘art collections,’ we will also qualify as capital investments.”

Peter Grosskopf also expects DeFi regulation to become a hot topic following the next round of elections in Europe, as MiCA will not apply to “crypto-asset services provided in a fully decentralised manner without any intermediary.”

The success of MiCA could provide a significant boost to both EU crypto businesses and the EU economy as a whole. However, whether this success is realized will depend on the practical implementation standards developed in the future.

MiCA is a major step forward for the crypto industry in the European Union and will open up new opportunities for companies to expand their reach, attract foreign capital, and create jobs. It will also bring more transparency and trust to the industry, allowing investors to make informed decisions. Finally, MiCA will pave the way for further regulation of NFTs and DeFi, ensuring the long-term success of the EU crypto market.

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