After gathering on the slopes of Davos in Switzerland, Europe is moving ahead with one of the most abundant and wide-spreading crypto legislations in the world. Paving the way for other developed nations to create their own frameworks for the ultimate legislation of cryptocurrencies and exchanges.
The new rules will be stricter than the existing ones in some countries in Europe. MiCA demands “an unprecedented level of transparency from crypto exchanges,” an EU spokesperson said.
Details of the New Legislation in Europe
Under the new legislation, crypto companies must keep the public informed about their pricing process and trading volumes in real-time. They must also settle trades on the same day.
The exchanges must also maintain their own funds, including cryptos, besides funds from customers. The regulation also explicitly prohibits insider trading.
MiCA will also introduce a “universal licensing approach for all EU member states,” making it the world’s most comprehensive legislation, the EU report said.
The MiCA licensing and other rules are “more complex, more sophisticated” than those currently established by the French regulator, Frédéric Montagnon, founder of French blockchain company Arianee.
Some 60 companies are already registered with the French Financial Markets Authority (AMF). However, “if the MiCA makes it mandatory for crypto service providers to get their businesses insured, it will be a headache for the startups in France,” Montagnon added.
Regulation won’t halt in France, however. And It is not surprising that one of the main objectives pursued by the Commission with MiCA is to avoid national regulations that will create a fragmented regulatory framework across the EU. The purpose of MiCA and DORA is to create a harmonized market for crypto assets for 450 million consumers and investors and to boost the development and evolution of crypto assets in the EU, granting the EU the leading role in the regulation of crypto assets.
Key Objectives of the New Legislation in Europe
Another key objective driving the legislation is the protection of investors and consumers. The Council stated that “MiCA will protect consumers against some of the dangers of investing in crypto assets and help them avoid fraudulent schemes. Crypto asset service providers will now become liable in case they lose investors’ crypto assets”.
The initiative is ambitious, but there are concerns that legislation, which is drafted to address challenges now, will become quickly outdated given the pace of evolution of this market. Rather than boosting the EU market for crypto assets, the EU regulations could actually become an obstacle to its development.
Who and what exactly will fall under the purview of the MiCA? Will others be forced into centralization when the primary goal of crypto is decentralization?
MiCA Separates 3 Types of Crypto Assets
MiCA defines crypto assets as the digital representation of a value or right. These assets may be transferred and stored electronically by using, for instance, digital ledger technology (DLT).
- Utility tokens: These assets provide digital access to a good or service. They’re available on DLT and are only accepted by the issuer of these tokens (e.g., a share of a company);
- Asset-referenced tokens: These are crypto assets aimed at maintaining a stable value. They reference one or more currencies that are legal tender, commodities, other crypto assets, or a combination of those assets.
- E-money tokens: You can use these crypto assets used as payment for a good or service.