EU reaches agreement on landmark MiCA regulation for crypto

The Council Presidency and European Parliament have settled on the Markets in Crypto-Assets (MiCA) proposal; ruling that crypto-asset service providers will require authorisation to operate in the EU, not including NFTs or media-related digital assets. Under the agreement, regulatory framework will protect investors and consumers, while ensuring financial stability and enabling innovation and growth. The regulations will help protect consumers from fraud and scams, as crypto-asset service providers will be liable if they lose assets and fail to protect investors’ wallets. The European Banking Authority (EBA) will form a public register of non-compliant crypto-asset providers. Bruno Le Maire, French Minister for the Economy, Finance and Industrial and Digital Sovereignty stated: “Recent developments on this quickly evolving sector have confirmed the urgent need for an EU-wide regulation. MiCA will better protect Europeans who have invested in these assets, and prevent the misuse of crypto-assets, while being innovation-friendly to maintain the EU’s attractiveness. This landmark regulation will put an end to the crypto wild west and confirms the EU’s role as a standard-setter for digital topics.” Sophia Le Vesconte, Senior Associate from global law firm Linklaters fintech team, states: “Reaching political agreement on MiCA is a major milestone for the EU. We are now nearing the finish line on all three of the legislative proposals made by the European Commission alongside its Digital Finance Strategy back in 2020 (MiCA, DORA and the DLT pilot regime). While some have criticised elements of MiCA as being heavy-handed or insufficiently tailored for novel structures, there is no doubt that the EU is now at the forefront of crypto regulation on the global stage, and that it is setting a standard.” CEO of fintech firm Modulus, Richard Gardner, comments: “MiCA is said to be the first comprehensive regulatory scheme, and it was built to guard against abuse and manipulation. Not everything contained in it is going to appeal to all the players, but, at this point, the industry just needs to understand what’s expected of it. It is well past time for a guidebook so that operators can act with intention.” The regulation will also implement restrictions on stablecoins. The EU press release announced that Stablecoin issuers will be supervised by the EBA and their “holders will be offered a claim at any time and free of charge.” The European Commission is also working on a report exploring the environmental impact of crypto-assets. Providers in the crypto-asset market are required to provide information on their environmental and climate footprint, to facilitate the European Securities and Markets Authority’s (ESMA) collection of information on environmental welfare in MiCA in order to establish regulatory standards. While the EU is moving forward with regulations, US Congress continues to debate legislation around monitoring crypto-assets. Gardner adds: “Regulation is most certainly coming, and it is clear that the EU wanted to be the first major player on the field.” Payment infrastructure company Mercuyo responded positively to the regulation. Research released by the company indicates more holders want regulation in the crypto sector: 68% of the British public would like to see crypto regulated and 61% are worried about falling into in fraud schemes. CEO of Mercuyo, Petr Kozyakov, observes: “The crypto market is rapidly evolving to reflect an innovative and dynamic ecosystem. An effective regulatory framework would unleash the potential of our sector, and open it up to even wider adoption and utility. I hope that other regulators will follow suit and work together with industry leaders to deliver a clear and effective global framework which will allow the sector to flourish.”