EU’s MICA crypto law beats US to market

Some rules are better than none

Europe is clearly taking crypto seriously, and moving faster than the US. The European Council approved the Markets in Crypto-Asset Regulation, or MiCA, last week; it could become law in 2024. The industry isn’t crazy about all the proposals, some of which rattled crypto leaders when they first came out early this year. But there is also a prevailing view that there is finally some regulatory clarity in a key crypto market rather than the murky regime of regulatory enforcement in the US

“A dedicated and harmonized framework is needed,” The European Council said in the proposal, which lays down rules for various aspects of crypto, such as protecting consumers, cracking down on money laundering and ensuring companies are accountable.

• Crypto providers will be required to register with EU authorities. They must publish a “crypto-asset white paper” that discloses key information about assets they sell, including the “underlying technology” and “related risks.”
• There will be strict guidelines for stablecoins, a clear reaction to the UST-luna collapse. These include strict capital requirements and rules for stablecoins that are not linked to the euro and other EU currencies. Non-euro pegged stablecoins may face limits on transaction volume and value.
• The transaction restrictions could have “severe negative effects,” Blockchain for Europe and the Digital Euro Association said. The trade groups warned in an August statement that they “would expect to see extreme volatility and mass redemptions.”
• But the rules could also strengthen the euro by encouraging euro-linked stablecoins. USDC issuer Circle has just launched Eurocoin, a new stablecoin pegged to the Euro.

Imperfect rules are better than none. Crypto is pushing back on key elements of EU proposals as the European Parliament prepares for a vote on MiCA.

• Some crypto companies and executives see MiCA as a positive development for an industry that largely operates in the dark. The EU process offers “apparently pragmatic and sensible regulation,” said Bradley Duke, founder and co-CEO of ETC Group.
• It has also “helped dispel the myth that crypto and regulation are incompatible,” said Georgia Quinn, general counsel at Anchorage Digital.
• Yes, some aspects of MiCA are “controversial and controversial for the crypto community,” said Anto Paroian, managing director and CEO of ARK36, a crypto investment fund, but once it becomes law, it will “likely accelerate the adoption of cryptocurrencies by offering regulatory clarity and broad customer protection for users and investors” across the EU.

“Crypto needs a sense of legitimacy to fulfill what it wants to become,” Klaros Group director Patrick Haggerty told Protocol. The industry is still viewed with suspicion and fear by critics who describe crypto as an unruly frontier. “To finally be able to operate in a region with clear rules is a big step toward legitimacy,” Haggerty said.

—Benjamin Pimentel (e-mail | twitter)

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