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MiCA: A new era of cryptocurrencies in Europe

MiCA (Markets in Crypto Assets) regulation is a revolutionary step for European cryptoassets markets, bringing new opportunities and better security to this dynamic and fast-growing sector. For the European Union, it is a ticket to a new era in the digital financial world. This 150-page legal framework builds on similar EU rules for securities trading. Any company wishing to offer cryptocurrency asset services in the EU will have to obtain authorisation from one of the 27 national EU financial regulators.1

What does MiCA entail?

Regulation (EU) 2023/1114, known as the MiCA Regulation, was adopted on 31 May 2023. Its provisions on stablecoins, will enter into force on 30 June 2024 and the full regulation will be effective from 31 December 2024. It represents the most comprehensive framework for the regulation of cryptoassets at EU level. It covers a wide range of activities, including issuance, trading and related services, with the aim of protecting investors and ensuring market integrity. MiCA introduces standardised definitions and safeguards to prevent misuse of funds, which are supervised by EU and national authorities in each Member State. It facilitates cross-border transactions through passporting, increases transparency and combats market manipulation. The regulation requires cryptocurrency trading companies to submit a white paper and defines the services that require authorisation. [1]

Opportunity for Slovakia

The MiCA regulation is inspired by securities regulation and brings a comprehensive framework for the cryptocurrency market across the EU. These rules will not only prevent abuse by investors, but will encourage innovation and the growth of new projects. Daniel Ďuriač from the National Bank of Slovakia told Trend that the licensing process and supervision will be similar to other financial sectors. The new rules imply the need to obtain a license from the NBS for companies providing services in the field of cryptoassets. Until now, a regular trade licence was sufficient for these firms. MiCA sets clear rules and reduces legal uncertainty, which may attract capital to the country. Passporting opens the door for Slovak crypto companies, which can now operate freely in EU-wide markets under a single licence, increasing competitiveness.

Increased investor confidence

EU regulatory moves such as MiCA may influence regulatory efforts in other parts of the world, including the United States, if the EU successfully implements these rules and ensures a stable and predictable cryptocurrency market. If this regulation helps to increase confidence in the EU cryptocurrency market, it could lead to increased investor interest in the sector. Investor confidence is often a key factor influencing the approval of such financial instruments by regulators.

Possible impact of MiCA on crypto ETFs in the US

If MiCA strengthens the European cryptoasset market and creates better regulatory conditions for firms in this sector, it would increase competitive pressure on US crypto ETFs. U.S. regulators would have to respond to international changes to maintain the competitiveness of their market.

Potential downsides

MiCA also carries potential disadvantages and shortcomings, such as the fact that it does not yet address decentralized financing (DeFi) or the regulation of NFTs, which may raise legal uncertainty and questions. Stablecoins that are not pegged to an EU currency will be banned if they have more than 1 million transactions per day, which may have a negative impact on cryptocurrency innovation. Compliance with MiCA rules may mean increased bureaucracy and costs for businesses, especially for smaller firms that may not have previously been subject to other financial regulations. These potential drawbacks could have an impact on competitiveness and innovation in cryptocurrencies and blockchain technologies in the EU.[2]

Conclusion

The MiCA regulation brings new opportunities and perspectives for Slovakia and the EU as a whole in the field of cryptoassets, creating conditions for a dynamic and innovative development of the digital economy and strengthening Europe's leadership in this sector. It is a step forward that moves us into a digital future full of opportunities and security. However, the question remains whether these rules will meet their objectives and whether they will be fair for all companies trading in cryptoassets.

Adam Austera, Principal Analyst at Ozios


[1] https://kpmg.com/sk/en/home/insights/2023/09/mica-cryptobusiness-eu-regulation.html#:~:text=Regulation%20(EU)%202023%2F1114,force%20on%2031%20December%202024.

[2] https://aibc.world/news/europes-new-crypto-mica-regulations-pros-and-cons/

Disclaimer:

The material herein is considered as marketing communication under the relevant laws and regulations, and as such is not a subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and should not be construed as containing investment advice, or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. The published content is intended for educational/informational purposes only. It does not take into account readers’ financial situation, personal experience or investment objectives. APME FX Trading Europe Ltd makes no representation that the information provided is accurate, current or complete; and therefore, assumes no liability for any losses arising from investments based on the supplied content. The past performance is not a guarantee of future results.

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