Though digital assets have been around for more than a decade, only recently have they begun to attract mainstream attention. Now, we have reached a point where everyone is trying to get in on the crypto trend, as worldwide financial experts present it as a viable long-term investment opportunity. Despite the popularity explosion of these assets, the ongoing belief is that this sector still has room for growth as more people will educate themselves about this financial universe and the benefits that exist within it.
Cryptocurrencies’ primary advantage is that they are decentralized assets. So, they do not depend on any entity, as fiat currencies do. Their limited supply also means that their value will grow over time, protecting against inflation. These reasons are why the executive branch of the EU, the European Commission, believes that the future of finance is digital. Their stance is that passing crypto regulation will reduce risk on the investor side and give legal certainty to those issuing these digital assets.
The European Commission aims to reduce market fragmentation and let companies that have received crypto authorization in one EU country provide their services across the whole union. That is why in September of 2020, the EU Commission published a proposal titled Markets in Crypto-Assets Regulation or MiCA. This proposal was part of a Digital Finance Package that included several other documents whose total goal is to add more digital resilience in the financial sector.
What Is MiCA & When Will It Enter Into Power?
MiCA is a proposed regulatory framework that has been in development since 2018, which will help virtual asset regulation and streamline distributed ledger technology in the EU. It is a 168-page document that focuses on rules that regulate stablecoins and crypto asset providers. Once in power, it will undoubtedly alter the European digital asset landscape forever.
The document has the outspoken ambition and potential to set the global standard for oversight of blockchain assets. However, fears are that it may overshoot its mark and impose overwhelming restrictions on businesses, inadvertently ending many innovative crypto use cases in the EU.
There is no deadline when this proposed legislation will go through, as the EU has complicated processes before something becomes law. Expectations are that by 2024, the union should have a comprehensive framework in place to regulate this sector and address the risks associated with blockchain technology. Though, some are optimistic and believe that MiCA can morph into law a lot sooner than 2024.
What Rules Will MiCA Apply to Crypto Assets?
For clarification-sake, cryptocurrencies are broadly considered legal across the EU. However, regulation currently depends on individual member states. MiCA aims to change all that. It details many types of crypto-assets not yet covered by the union’s financial law, including utility tokens, asset-referenced tokens (ART), e-money tokens (EMT), and more. The last two are what users refer to as stablecoins, which purport to maintain a stable value by referring to the worth of fiat currencies.
MiCA mandates that all issuers of crypto-assets must first publish a white paper and sent it to their national financial supervisory authority twenty days before the emission of their asset. That supervisory body has the power to prohibit the issuer from releasing their planned tokens. Except for existing credit institutions, everyone else that wishes to engage in crypto-asset activities such as trading, brokerage, or offering investment advice will also have to gain prior permission from their national supervisory authority to do so. MiCA also introduces rules against insider trading and market manipulation on crypto trading platforms. Once this framework comes into power, these activities will instantly become illegal in the EU.
The Importance of Regulating Crypto Transactions
Currently, there is no doubt a regulation gap concerning crypto assets that the EU needs to fix. It is a problem that contributes to weak investor protection and fraud. Defined laws will help reduce the risk of cyber-attacks and curtail illicit payments via crypto assets. Many online businesses that depend on secure and fast transactions are now gravitating toward cryptocurrencies as a featured payment method. For example, fast withdrawals in the gambling niche are of paramount importance. They can make or break the gaming experience and are a top priority for most players. Thus, crypto transfers are rising in this industry, as they are in the supply, music, and video gaming spheres.
To Wrap Up
The discussions regarding crypto-asset regulation have morphed from niche conversations to a priority legal agenda proliferating throughout the highest political institutions on the European continent. It is hard to accurately estimate the date when MiCA will get adopted and come into power, but it will at least take two years from now until its rules begin to apply. In most experts’ eyes, this framework will only prove to be a success if its requirements are not too high, and it allows startups to function freely in this sector.
About the Author
Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OnlineUnitedStatesCasinos.com. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.