The EU’s crypto industry applauds MiCA – but is watching what happens next

The EU Parliament’s landslide vote for new crypto licensing rules was largely met with applause from the industry, but now attention is turning to the details that need to be colored in.

Shortly after the vote, crypto exchange Coin base tweeted that the vote is an “important moment for crypto regulation,” as the law, which requires exchanges and wallet providers to seek a license and stablecoin issuers to hold adequate reserves, will “give crypto organizations the confidence to invest and grow in the region. “

For Antoni Trenchev, CEO of Nexo, the approval shows that “the crypto industry has finally received this confirmation,” adding in an email that “MiCA makes Europe fit for the digital age and will promote innovation and fair competition.” The crypto lender announced last year that it would shut down US operations, saying talks with regulators there had reached an impasse.

The optimism about MiCA’s impact appears to be matched in the traditional financial sector. “We see regulation as a net positive for the industry,” said a Deutsche Bank staff report, citing likely impacts on corporate adoption, liquidity and volatility.

Crypto is “a dangerously unregulated sector,” said research analysts Marion Laboure and Cassidy Ainsworth-Grace, which has “exposed investors to huge losses across all crypto platforms.”

The key question now is how the companies will prepare. While the contours of the law have been known for some time, there is also a 12-18 month transition period that will start ticking in June or July, and getting ready will be a bigger task for some than others, according to Bitstamp’s John Ehlers.

“For those who are new to this business and coming into the European market, it’s a step change in how they operate,” Ehlers, the exchange’s chief operating officer, told CoinDesk’s First Mover show on Thursday.

“If you’re new to this area, you’re not going to have very strict AML [anti-money laundering] account opening requirements,” Ehlers said. “If you’ve already been regulated in the EU, you’re probably in pretty good shape.”

Even well-established players will have a task ahead of them – such as Binance, which has a number of crypto registrations within the block, including under the relatively well-developed and MiCA-like regime in France.

“There is now a clear playing field for crypto exchanges to operate in the EU,” Binance’s CEO Changpeng Zhao tweeted in response to the poll. “We are ready to make adjustments to our business over the next 12-18 months to be in a position of full compliance.”

But, as Zhao also said, “the fine details will matter.”

While the overall MiCA law, known as the “Level One” text, is now nailed down, EU agencies such as the European Securities and Markets Authority say they must now draft and consult on “a significant package of implementation measures” which lies below.

Players in the crypto industry will be watching closely.

“There are many things that the MiCA Level One text does not define – those are questions that will be answered in the so-called Level Two legislation,” Tommaso Astazi, head of regulatory affairs at the lobby group Blockchain for Europe, told a Brussels event in March.

There were last-minute disagreements among lawmakers and governments over how the law should treat non-fungible tokens (NFTs) and decentralized finance (DeFi), and hastily drafted compromise language may not always be clear on, for example, what is or is. t an NFT, or a decentralized grouping.

Although the EU law sets a common standard, it will be overseen by individual national regulators in the bloc’s 27 member states, and there are concerns that they could gloss over the rules by imposing extra hurdles, or undercut each other in a bid to attract businesses . .

The final details of the law should “ensure consistent MiCA implementation across member states, particularly at the licensing stage, to ensure a level playing field and avoid regulatory arbitrage,” as well as a smooth transition from existing national regimes, said Mark Jennings, Kraken’s Head of European operations, in an email sent ahead of the vote.

The final steps could prove critical to MiCA’s success, Jennings suggested.

“What once seemed like a lofty legislative goal could soon become a universal standard for customer protection and business efficiency, if the EU can get the technical implementation of this framework right,” he said.