Analysis: the new MiCA regulation protects the client by seeking to end almost all scams carried out with cryptoassets
By Mubashir Hussain Rehmani, PERSON
Stocks, bonds, derivatives and real estate are some examples of conventional investment products available for the public to grow their money. According to a report from April 2023 survey According to the Banking and Payments Federation of Ireland (BPFI), stocks or shares are held by 15% of adults, while cryptocurrencies are held by 8%.
On the one hand, cryptoassets are gaining popularity as an alternative investment product. But, on the other hand, the governor of the Central Bank believe Unbacked cryptoassets are more like Ponzi schemes than investments. The European consumer group BEUC She complained to the European Commission that online platforms allegedly facilitate the misleading promotion of cryptoassets, thereby making customers more vulnerable to losing significant amounts of money and becoming victims of scams.
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From RTร Radio 1's The Business, financial advisor Paul Merriman on new EU cryptocurrency legislation
Take the case of a fictional client named Alice. She lives in Limerick and invested part of her savings in cryptocurrencies. After a few months, the cryptocurrency project was liquidated or the cryptocurrency exchange crashed. Alice has nowhere to go, nowhere to complain, and her investment is lost. As a client, she had no protection available to her.
The existing regulations such as Directive on markets in financial instruments and Anti-money laundering directive they are not enough to regulate cryptoassets. They do not protect customers, provide a level playing field for businesses, track transactions, ensure market integrity, identify customers, prevent or combat money laundering or the financing of terrorism and organized crime.
Enter the Cryptoasset markets (MiCA) regulation. This defines a cryptoasset as โa digital representation of a value or right that can be transferred and stored electronically using distributed ledger technology or similar technology.โ Some examples of cryptoassets include unbacked cryptocurrencies (bitcoin, Ethereum, XRP etc), backed cryptocurrencies or stablecoins (USDT, USDC, BUSD etc), non-fungible tokens (NFTs), DeFi Tokenscoins and various other utility tokens.
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From RTร Radio 1's Drivetime, interview with FLI Group's Michael Flynn who is helping a Welshman buy โฌ120m worth of Bitcoin
The scope of MiCA is clear: it classifies cryptoassets into asset reference tokens (ART), electronic money tokens (EMT), and utility tokens. MiCA's classification of cryptoassets is based on how these cryptoassets stabilize their value. For example, EMTs aim to stabilize their value by referencing only an official currency of a country.
ARTs aim to stabilize their value by referencing another value or entitlement, or a combination thereof, including one or more official currencies; Simply put, ARTs are asset-backed. The issuer of utility tokens provides access to a service either through utility tokens. In cases where cryptoassets are completely decentralized or represent services or physical assets that are unique and non-fungible, they should not fall within the scope of MiCA.
MiCA identifies the role and responsibilities of cryptoasset issuers or cryptoasset service providers. Furthermore, market abuse strategies have been clearly discouraged and standards have been created. The regulation empowers regulatory authorities to conduct investigations against major ART and EMT issuers, conduct on-site inspections and impose a fine. Complaint management procedures, marketing campaigns and the right to withdraw within 14 days already exist.
EU governments want to demonstrate that they do not support unregulated and unsupported crypto asset trading and investment activities.
Until now, anyone can launch a new cryptocurrency, issue and exchange a token, raise money from the public through Initial Coin Offerings (ICOs), and then run away. MiCA severely restricts this and the person offering ART to the public can be a legal entity or a credit institution and be authorized by a competent authority. Additionally, the ART white paper clearly identifies ART issuer information, risks, asset reserve, climate impact, etc. This clearly protects the customer by closing almost all scams carried out with cryptoassets.
Cryptocurrency advocates claim that MiCA means that cryptocurrencies will become more regularized and prosper in the EU, but this is not true. In no way does the MiCA regulation consider cryptocurrencies such as Bitcoin or Ethereum as legal tender, means of payment or exchange. Even in the presence of MiCA regulation, Warnings from the Central Bank of Ireland. and the European supervisory authorities remain valid.
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From RTร Radio 1's Today with Claire Byrne, Blockchain Ireland and Coinbase's Lory Kehoe and personal finance advisor Eoin McGee on the Central Bank of Ireland's crypto warnings
Consumers are warned about the risks of investing in cryptoassets because cryptoassets are highly risky and speculative and are not suitable as an investment or as a means of payment or exchange. Additionally, consumers face the very real possibility of losing all of their invested money if they purchase these assets and consumers warned Beware of social media influencers posting scam ads.
The main purpose of MiCA is clear: it addresses the decentralization and anonymity of existing cryptocurrencies by placing certain types of cryptoassets (ART, EMT and utility tokens) under centralized authorities, eliminating anonymity and overcoming the risks and problems related to decentralized cryptocurrencies for some. extent. It is a major setback for decentralized cryptocurrencies like Bitcoin. By enforcing the MiCA regulation, it seems that EU governments want to convey the message that they do not support the trading and investment activities of so-called decentralized, unregulated and unsupported crypto assets.
Dr Mubashir Husain Rehmani He is a professor in the Department of Computer Science at Munster University of Technology (person)
The views expressed here are those of the author and do not represent or reflect the views of RTร.
