What does MiCA entail?
Regulation (EU) 2023/1114, known as the MiCA Regulation, was adopted on May 31, 2023. Its provisions regarding stablecoins take effect on June 30th 2024, and the entire regulation will be applicable from December 31st 2024. It represents the most extensive framework for regulating crypto assets at the EU level. It covers a wide range of activities, including issuance, trading, and related services, aimed at protecting investors and ensuring market integrity. MiCA introduces standardized definitions and protective measures to prevent the misuse of financial resources overseen by EU authorities and national authorities of individual member states. It facilitates cross-border operations through passporting, enhances transparency and combats market manipulation. The regulation requires companies trading in crypto to submit a so-called White Paper and defines services that require authorization.
Opportunity for Slovakia
MiCA Regulation was inspired by securities regulation and brings a comprehensive framework for the crypto-assets market across the EU. These rules will not only prevent investor abuse but also foster innovation and the growth of new projects. Daniel Ďuriač from the National Bank of Slovakia mentioned in an interview with Trend magazine that the licensing process and supervision will be similar to other financial sectors. New rules entail the need for NBS permission for companies providing crypto services. Until now, these companies only needed a regular trade license. MiCA establishes clear rules and reduces legal uncertainty, which could attract capital to the country. Passporting opens doors for Slovak crypto ventures, which can now operate freely in EU markets under one license, thereby increasing competitiveness.
Increased investor confidence
EU regulatory steps, such as MiCA, can influence regulatory efforts elsewhere, including the United States, if the EU successfully implements these rules and ensures a stable and predictable crypto market. If this regulation contributes to increased trust in the crypto market in the EU, it could lead to increased investor interest in this sector. Investor confidence is often a key factor influencing the approval of such financial instruments by regulatory bodies.
Potential impact of MiCA on American crypto ETFs
If MiCA strengthens the European crypto-assets market and creates better regulatory conditions for companies in this sector, it might increase competitive pressure on American crypto ETFs. US regulatory authorities would need to respond to international changes to maintain the competitiveness of their market.
Possible Disadvantages
MiCA also brings potential drawbacks and shortcomings, such as the fact that it does not yet address decentralized finance (DeFi) or regulate NFTs, which could cause legal uncertainties and questions. Stablecoins not tied to the EU currency will be prohibited if they exceed 1 million transactions daily, which could have a negative impact on innovation in cryptocurrencies. Compliance with MiCA rules may mean increased bureaucracy and costs for businesses, especially for smaller firms that may not have been subject to other financial regulations before. These potential drawbacks could impact competitiveness and innovation in cryptocurrencies and blockchain technologies within the EU.
Conclusion
MiCA Regulation brings new opportunities and perspectives for Slovakia and the entire EU in the field of crypto assets, creating conditions for dynamic and innovative development of the digital economy and strengthening Europe's position as a leader in this sector. It is a step forward that propels us into a digital future full of opportunities and security. However, the question remains whether these rules will achieve their stated goals and whether they will be fair to all companies trading in crypto assets.
Adam Austera, Chief Analyst at Ozios
Sources:
[1] CoinDesk: MiCA: Europe's Comprehensive New Crypto Regulation Explained
[2] KPMG: MiCA – Crypto Business EU Regulation
[3] AIBC: Europe's New Crypto MiCA Regulations: Pros and Cons
