Regulators and industry players highlighted a number of potential implications and impacts of the European Union's Markets for Crypto Assets (MiCA) regulation at Paris Blockchain Week 2023.
A panel titled 'MiCA: How does the EU regulate cryptography?' delved into the proposed MiCA regulation that is expected to go into effect in 2024. The 400-page regulatory guide for cryptocurrencies and digital assets has been a important topic of conversation throughout the continent.
Gundars Ostrovskis provided inside information on the development of the MiCA documentation, given his involvement as a team leader in the European Commission's Digital Finance Unit. Working alongside colleagues who drafted the MiCA regulations, Ostrovskis highlighted the belief that the legislation will benefit businesses and users in the cryptocurrency ecosystem:
"Clearly we hope it will be helpful in terms of strengthening the industry by providing regulatory certainty, this is one of the important things for strategic planning for companies and protecting industry customers while ensuring market integrity."
MiCA has been in development for a couple of years and has involved conversations with various countries as well as industry players. Ostrovskis highlighted that the implementation of MiCA will require adjustments in states where regulatory frameworks already exist for the cryptocurrency industry.
Related: European Parliament Committee Approves MiCA Cryptographic Framework in Landslide Vote
Janet Ho, head of EU policy at Chainalysis, believes that the success of MiCA will depend on a number of factors. Firstly, a sufficient understanding of the requirements of the legislation will be required, followed by solid feedback and reworking of certain parts of the documentation:
“Legislation is not a static process. There is not always a perfect regulation. We know there will be revisions and improvements.”
Ho suggested that the European Commission should review the implementation of the obligations considering feedback from government supervisors and industry participants and the initial impact of MiCA.
Hubert de Vauplane, a partner at the law firm Kramer Levin Naftalis & Frankel LLP, has also provided a livelihood as an adviser to European and French lawmakers in a variety of areas including FinTech, economic payment and digital.
De Vauplane was particularly concerned about the impact of MiCA on existing cryptocurrency and Web3 regulations in specific countries of the European Union:
“Some countries like France have local regulation. It's important to note that those regulations will go away, potentially entirely."
Hubert noted that newer industry phenomenon such as non-fungible tokens (NFTs) and DeFi products and platforms that are not currently included in the MiCA documentation may well remain under the purview of country-specific laws. :
“That means there is no room for local regulation that is covered by MiCA, specifically for the definition of digital assets.”
Nadia Filali, director of the blockchain program at Caisse des Dépôts Group, highlighted the importance of governments, regulators and industry participants working together, highlighting the development of regulation in France as an example:
"For me, regulation is something that could help innovation and could help the popularity of the technology."
Ostrovskis remained convinced that the EU Commission has provided a good balance of regulatory parameters for certain aspects of the cryptocurrency ecosystem, while leaving other areas more open to unimpeded development:
“That will provide a strong regulatory framework for many activities in the crypto-asset ecosystem, while also having this centralized finance (CeFi) space, which will, to some extent, remain unregulated.”
Ostrovskis emphasized that CeFi and DeFi is an area where the European Commission wants to encourage innovation, allowing new ideas to be tested as the space develops:
"These activities are still limited in scale, which also has some features that allow us to, let's say, leave it alone for now before it possibly jeopardizes financial stability."
A final vote on the European Union's MiCA regulation is set for April 2023. The anticipated final decision on the legislation was postponed to January 2023 due to technical problems related to the translation of the document into the 24 official languages of the EU.
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