Bitcoin
Cryptocurrency Law Is Coming: Prepare for a Rough Journey
New legislation from Brussels seeks to put an end to the fraud and turmoil that has characterized markets like bitcoin, but few if any appear willing to comply.
ANNOUNCEMENT
The EU’s landmark crypto regulation comes into force within a week – and it doesn’t appear that any major specialized players have managed to get authorized.
The new regime offers players such as exchanges and wallet providers the opportunity to apply for a license that will allow them to operate across the block.
Brussels has boasted of being the first global jurisdiction to establish custom rules for the cryptocurrency market – a market that has seen significant turmoil and manipulation.
But with time ticking, the jury is still out on whether the EU law on crypto asset markets, MiCA, heralds a new era for the industry – or will kill it.
After passing the law in June 2023, French Finance Minister Bruno Le Maire said the landmark legislation will “prevent the misuse of cryptoassets while being supportive of innovation to maintain the EU’s attractiveness.” .
A few months later, top lawmaker Stefan Berger (Germany/European People’s Party) said the rules “put the European Union at the forefront of the token economy around the world.”
Many cryptocurrency users have long rejoiced in their freedom from government control – even as some recognize that regulatory recognition could offer greater credibility and certainty.
As the prospect of enforcing financial-style rules looms ever closer, the mood in the industry becomes more anxious.
Difficult and uncomfortable
“It is a difficult and uncomfortable period,” Faustine Fleuret, president of French crypto lobby group ADAN, told Euronews, citing regulations that are both strict and unclear.
This sadness is shared by Marina Markezic, founder of the Brussels-based European Crypto Initiative, who points out that many crypto companies have not yet told their customers exactly how the law will work.
On June 3, Binance, one of the world’s leading cryptocurrency exchanges, said it would restrict access to unauthorized cryptocurrencies once MiCA takes effect, but others have not been so forthright, she said.
“June 30 is a week away and I, as a consumer, still don’t know what will happen,” said Markezic.
A large part of MiCA is dedicated to stablecoins – cryptographic assets that seek to peg their value to other assets, such as the price of gold or the US dollar.
These are the most difficult parts of MiCA and the first to come into force – other provisions, such as exchange licenses, begin on December 30th.
But there is still debate over what the rules actually mean – for example, whether handling stablecoins means you need to register as a payment provider, says Fleuret.
Brief notice
Worse still, says Fleuret, the European Banking Authority (EBA) only published its final set of technical standards last week, giving traders little opportunity to prepare.
“Less than two weeks before a big, big brick of the MiCA regulation came into effect, the people who have to comply with it didn’t even have all the operational details they need to comply,” she said.
“For newcomers, it is actually much more complicated to be ready by June 30, perhaps impossible,” she said – although she admits that existing licensed payment providers may be in a better position.
An EBA spokesperson told Euronews that the EU agency finalized and published all 18 sets of standards and guidance before the June 30 deadline.
“The EBA has been calling on the industry to prepare in good time” for the new stablecoin regime and has offered a tool to allow companies to resolve interpretation issues, the spokesperson added.
No approvals?
Corroborating Fleuret’s analysis, Euronews did not identify any major crypto players that have been definitively approved by MiCA.
In April, Paolo Ardoino, CEO of stablecoin issuer Tether, said he was “still discussing with the regulator” his concerns about the law. Circle, whose euro-backed stablecoin appears aimed at EU users, announced last year that it had applied for a MiCA license.
With a week to go, neither company has publicly announced that they have obtained regulatory approval; Neither responded to Euronews’ request for comment.
Both Markezic and Fleuret are still positive about some aspects of MiCA, which in particular will allow crypto companies to operate across Europe with a more or less clear structure.
But Fleuret fears that the law will not be adapted to the small players that tend to dominate the space.
“The problem with MiCA is that it is not proportionate,” she said. “If you are a startup trying to launch activity in the market now, you would have to apply the same rules as Société Générale”, a French bank that is also venturing into financial technology.
And for all the EU’s fanfare about promoting innovation, the difficult hurdles seem more a feature than a bug.
Big Tech Fears
Those who drafted MiCA were motivated in part by fears that Facebook might issue its own form of money, Libra, linked to a basket of major world currencies.
Finance ministers protested the idea of a major foreign technology giant creating a currency that could supplant the euro.
The Facebook project fell apart, mainly due to political backlash – but regulators’ fears were confirmed in the spring of 2023, when Terra, a stablecoin that was supposed to maintain its value with the US dollar, fell under market pressure, sending much of the of the cryptographic ecosystem. therefore.
The final version of MiCA imposes strict reserve requirements for euro-based stablecoins and a limit of one million daily transactions for others.
But this could affect existing agreements, as operators don’t always monitor this information, says Markezic.
“Emissions are happening globally and there was no system before about how to align, configure or analyze… how much is emitted within a specific jurisdiction,” she said. “Sometimes issuers don’t know who owns these tokens.”
Some difficult years
Crypto has had a rough few years. After Luna’s downfall came a period of turmoil and regulatory backlash, and many of the industry’s leading figures are now in prison.
In the US, Sam Bankman-Fried was recently sentenced to 25 years after pleading not guilty to fraud and money laundering during his time running the doomed cryptocurrency exchange FTX.
Similarly, Binance founder Changpeng Zhao was sentenced to four months in prison after pleading guilty to money laundering.
All of this may have tarnished crypto’s reputation, but Markezic is confident that legal credibility could herald a new era.
Established providers like banks “are waiting for regulation,” she said, with a clear set of rules that could take the technology out of its current, somewhat nerdy niche.
“I think we will talk less about technology and less about stablecoins and… more about utility and what it can bring to the consumer,” she said. “There are a lot of advantages when it comes to seamless transactions, 24/7 processes and so on.”
But even she recognizes that there will be bumps in the road between today’s Wild West and mainstream credibility.
“Many companies will not have the ability to be compliant,” she said. “Very small startups and innovative companies will likely limit their activities in the EU.”