In the last week, we saw the European Union take the first step toward regulating the crypto market. The Council presidency and the European Parliament reached a provisional agreement on the markets in crypto-assets (MiCA) proposal which covers issuers of unbacked crypto-assets, stablecoins, as well as the trading venues and the wallets where crypto-assets are held.
The groundbreaking ruling will lay an EU-wide regulatory framework for crypto assets and require cryptocurrency companies to obtain a licence and implement customer safeguards to issue and sell digital tokens within the EU.
Below is a commentary from industry experts on what this new ruling means for the blockchain and crypto sector.
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European Union’s Crypto Regulation
“MiCA provide comprehensive financial regulation and need to clearly distinguish NFTs as non-financial products that are not subject to the same financial regulation. Without clear lines being drawn on what is and what isn’t covered, creators would be stifled by vauge regulatory teems without receiving meaningful consumer protection.
“MiCA should recognized that NFTs are an extremely broad category covering any unique and non-fungible item of digital data, and that the category is meaningless as a category for regulation. For example, many people are familiar with art NFTs– it is illogical to have digital art NFTs fall under financial regulation (whether due to error in drafting or uncertainty in application) while other forms of digital or physical art are exempt. Applicable regulation here should apply to art generally, not the token format used.
“As another example, Article 4(2)(c) removes certain regulation from tokens that are “unique and not fungible”. However, Article 13(1)(a) would still require NFT issuers to “act honestly, fairly and professionally”. It is impossible to understand how this would apply to NFTs from art to music to video game items, and what same standards would be applied to both children minting simple art NFTs and large corporations such as Nike and Adidas. This can only result in uncertainty that unintentionally stifles creators.”
“The Markets in Crypto Assets (MiCA) law marks the start of regulation for the crypto industry within the European Union. This is highly welcomed as startups and entrepreneurs have had to navigate an uncertain environment so far. In the EU, the challenge is even higher, as each country has its own rules creating regulatory arbitrage. The proposed MiCA agreement would put an end to this.
“At the same time, regulators need to be mindful of stifling innovation. Recent events with stablecoins have raised concerns regarding the risks associated with crypto. However, crypto is the most significant innovation in the financial space in decades and a cautious approach is advised. Measures such as proper risk disclosures, and requiring capital reserves for large players are good ideas that will benefit consumers.
“We must also not forget that we are in the early stages of development for this technology and that entails risks. Innovation does not come without risk, as such, regulators should prioritize minimizing bad actors and limiting systemic risks, while leaving an open framework that encourages rethinking financial problems with a new perspective.
“Furthermore, regulators should maintain a technology-neutral approach that allows the market to decide the winners and losers. Moreover, legislation needs to be drafted with the consideration of the new paradigm that blockchain technology imposes, and avoid trying to regulate the new world with outdated rules. If these requirements are met, the EU will likely become a highly attractive area for blockchain companies around the world.”