MiCA

Industry leaders and policymakers react to passage of MiCA in EU

Many lauded the bill’s approval, suggesting that its anticipated passage could leave the United States at a disadvantage for attracting crypto firms and investments.

Though a crypto-focused regulatory framework still needs approval from the European Council before final passage, many in the space have reacted positively to the Markets in Crypto Assets, or MiCA, bill moving forward.

On April 20, the European Parliament voted to pass MiCA after two delays starting in November 2022. The bill aims to create a consistent regulatory framework for crypto assets among the European Union member states.

Though EU lawmakers still need to conduct legal and linguistic checks for MiCA as well as publish the bill in the EU journal, the policy could go into effect as early as 2024, depending on the European Council vote. Many crypto industry leaders and policymakers largely lauded the bill’s approval.

Changpeng “CZ” Zhao, CEO of Binance, suggested he would begin implementing changes to the exchange in the next 12-to-18 months in order to be in compliance with the potential new framework. Others targeted the United States for seemingly falling behind in digital asset regulation — a move that could drive companies to the EU with the implementation of MiCA.

“Overall we think this is a pragmatic solution to the challenges we collectively face,” said CZ. “There are now clear rules of the game for crypto exchanges to operate in the EU.”

Prior to the European Parliament vote, EU Commissioner for Financial Stability Mairead McGuinness told lawmakers they were “ahead of many other jurisdictions” in regard to crypto regulation. More than 500 members of parliament ended up voting in favor of MiCA.

Related: Kraken receives virtual asset service provider authorization in Ireland ahead of MiCA vote

One of the key votes for the crypto framework followed a crypto market crash and the bankruptcies of high-profile firms that had many lawmakers across the globe calling for regulatory clarity. Christine Lagarde, president of the European Central Bank, also suggested that policymakers needed to implement a broader framework in response to the collapse of FTX, proposing a “MiCA II” in the future.

Magazine: Best and worst countries for crypto taxes

French central bank looks at certification, incorporation as part of DeFi regulation

The Banque de France presented a well-written consideration of issues related to DeFi and the forthcoming MiCA regulation, with suggestions.

The Banque de France has contributed to the discussion of European crypto asset regulation with a close examination of decentralized finance (DeFi) and potential approaches to its regulation. The discussion is timely, given the growing use of tokenization in finance and the introduction of blockchain technology in many economic sectors, the authors said.  

The paper, written by members of the Fintech-Innovation Hub at the French central bank’s Prudential Supervision and Resolution Authority, notes that the term “DeFi” represents a range of crypto asset services, technologies and associated risks, which cannot be adequately addressed with current regulations:

“The main idea developed in this paper is that the regulation of disintermediated finance cannot simply replicate the systems that currently govern traditional finance.”

The paper suggests that regulation through certification could strengthen blockchain infrastructure security, decentralized autonomous organizations (DAOs) could be supervised by making them incorporate, and control over the intermediaries that allow access to DeFi services could enhance customer protection. As currently written, the European Union’s Markets in Crypto-Assets (MiCA) regulation excludes fully decentralized services from its scope and would have to redefine “crypto asset service providers” to make it possible to extend regulation to DeFi intermediaries.

Blockchain code could be subject to minimum standards, the paper argues. However, controlling the concentration of validation capacities in a DAO would be fraught with complexities and knock-on effects on a public blockchain, so the authors prefer a “resolution mechanism” that can be triggered after a cap has been reached. A private blockchain has the advantage of selecting trusted players but would require a more specific regulatory framework.

Related: French central bank pilots blockchain-based CBDC for debt market

Furthermore, the code in smart contracts could be subject to certification through a variety of mechanisms to assure it functions as intended, the paper says. Decentralized oracles could be regulated to avoid collusion.

Stablecoin regulation would be a necessary complement to DeFi regulation, as stablecoins “are now essential to the functioning of DeFi.” This is complicated under the MiCA framework, due for its final vote this month, as “the MiCA Regulation does not apply to services provided in a fully decentralized manner without any intermediary.” An additional rule would have to be introduced here, too, for the regulation of stablecoin use in DAOs.

At 45 pages, not including a consultation questionnaire, the paper’s argumentation is dense. Nonetheless, the English translation distinguishes itself with its clear language and thorough descriptions of DeFi technology and the issues it perceives with it.

Magazine: ZK-rollups are ‘the endgame’ for scaling blockchains: Polygon Miden founder

EU MiCA crypto regulation is a ‘balancing act’: Paris Blockchain Week 2023

Industry experts and regulators weigh in on the European Union’s proposed MiCA rules at Paris Blockchain Week.

Regulators and industry players highlighted several implications and potential impacts of the European Union’s Markets in Crypto-Assets (MiCA) regulation at the Paris Blockchain Week 2023.

A panel titled “MiCA: How is the EU Regulating Crypto?” delved into the proposed MiCA regulation, which is expected to take effect in 2024. The 400-page regulatory guidelines for cryptocurrencies and digital assets have been a major talking point across the continent.

Unpacking MiCA and its implications — a panel discussion featuring industry experts and regulators at Paris Blockchain Week 2023. 

Gundars Ostrovskis gave inside insights into the development of the MiCA documentation, given his involvement as a team leader in the Digital Finance Unit of the European Commission. Working alongside colleagues that drafted the MiCA regulations, Ostrovskis highlighted the belief that the legislation would be of benefit to companies and users in the cryptocurrency ecosystem:

“We clearly expect it to be helpful in terms of strengthening the industry by giving regulatory certainty, this is one of the things that is important for businesses strategic planning, and protecting customers of the industry while ensuring market integrity.”

MiCA has been in development for a couple of years, involving conversations with various countries and industry players. Ostrovskis highlighted that the implementation of MiCA would require adjustments in states where regulatory frameworks for the cryptocurrency industry already exist.

Related: European Parliament Committee passes MiCA crypto framework in landslide vote

Janet Ho, head of EU policy at Chainalysis, believes that the success of MiCA will be dependent on a number of factors. Firstly, a sufficient understanding of the requirements of the legislation will be required, followed by robust feedback and reworking of certain parts of the documentation:

“Legislation is not a static process. There’s not always a perfect piece of regulation. We know there will be reviews and improvements.”

Ho suggested that the European Commission should review the implementation of obligations, and consider feedback from government supervisors and industry participants, and the initial impact of MiCA.

Hubert de Vauplane, a partner at law firm Kramer Levin Naftalis & Frankel, also provided food for thought as an adviser to European and French lawmakers on a variety of areas, including fintech, economics and digital payments.

De Vauplane was particularly concerned about the impact of MiCA on existing cryptocurrency and Web3 regulations in specific countries in the European Union:

“Some countries like France have local regulation. It is important to keep in mind that those regulations will disappear, potentially entirely.”

De Vauplane also said that newer industry phenomena like nonfungible tokens (NFTs), and decentralized finance (DeFi) products and platforms that are not currently included in the MiCA documentation might well continue to fall under the purview of country-specific laws:

“That means that there is no space for local regulation, which is covered by MiCA, specifically for the definition of digital assets.”

Nadia Filali, Caisse des Dépôts Group’s blockchain program director, stressed the importance of governments, regulators and industry participants working together, highlighting the development of regulation in France as an example:

“For me the regulation is something that could help innovation and could help the popularity of the technology.”

Ostrovskis remained convinced that the European Commission has provided a good balance of regulatory parameters for certain aspects of the cryptocurrency ecosystem while leaving other areas more open to unencumbered development:

“That will provide a sound regulatory framework for many activities in the crypto asset ecosystem while we also have this centralized finance (CeFi) space, which will, to some extent, remain unregulated.”

Ostrovskis stressed that CeFi and DeFi are areas in which the European Commission wants to foster innovation, allowing for new ideas to be tested as the space develops:

“These activities are still of a limited scale, which also has some characteristics that allow us to, let’s say, leave it on its own for the time being before it possibly endangers 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 deferred in January 2023 due to technical issues relating to the translation of the document into the 24 official languages of the European Union.

War had no impact on Ukraine’s regulatory approach to crypto, Kyiv lawmaker says

The adoption of crypto law in Ukraine has been slowed mainly due to the need to adapt it to tax and civil codes, an official told Cointelegraph in an exclusive interview.

Ukraine continues working on cryptocurrency legislation a year after Russia’s invasion. According to Yurii Boiko, commissioner of Ukraine’s National Commission on Securities and Stock Market (NCSSM), the war has not changed its regulatory stance.

Ukraine has continued to follow in the footsteps of the European Union concerning digital asset laws, Boiko told Cointelegraph in an interview.

The commissioner said Ukrainian lawmakers have been working to implement major European crypto regulations, known as the Markets in Crypto Assets regulation, or MiCA.

“The approach to the regulation of the virtual asset market has not changed during the war,” Boiko stated, adding:

“We clearly know where we should go because our path is European integration and the introduction of better EU norms and rules to our markets. Therefore, we confidently go our own way and implement MiCA regulations into the legislative plan.”

Boiko noted that the adoption of crypto legislation in Ukraine had been slowed mainly due to the need to develop necessary amendments to the country’s tax and civil codes. Another factor is Ukraine’s path to European integration, the official said, adding that the NCSSM has been actively cooperating with international colleagues to implement regulations like MiCA.

National Commission on Securities and Stock Market commissioner, Yurii Boiko

According to Oleksii Zhmerenetskyi, head of the parliamentary group Blockchain4Ukraine, the country’s legislature started working on regulating the cryptocurrency market in October 2017. 

“Unfortunately, at that time, the Verkhovna Rada of the eighth convocation was unable to adopt a crypto law, and only since the election of President Volodymyr Zelensky, Verkhovna Rada of the ninth convocation returned to consideration of it,” Zhmerenetskyi said. The lawmakers subsequently created the Blockchain4Ukraine group together with more than 50 deputies in September 2019, he noted.

Zhmerenetskyi added that a working group under the NSSMC is currently finalizing a package of amendments to the draft law “On Virtual Assets” to adapt it to MiCA, which the European Parliament will vote on in April. As soon as the president adopts and signs the package, the NSSMC and the National Bank of Ukraine (NBU) will prepare by-laws, after which Ukraine will officially launch the virtual assets market, he said.

“We plan to do this by the end of this year,” Zhmerenetskyi stated.

Related: Ukraine netted $70M in crypto donations since start of Russia conflict

As previously reported, Ukraine’s central bank banned Bitcoin (BTC) purchases with the local currency, the Ukrainian hryvnia, in April 2022. The NBU only allowed Ukrainians to buy crypto with foreign currency, with total monthly purchases not exceeding 100,000 hryvnia ($3,300).

Bank of Italy selectively encouraging DLT, preparing for MiCA, governor says

Italian central banker Ignazio Visco talked about fostering or discouraging crypto assets during a lengthy speech to the Italian financial markets association.

The Bank of Italy is looking for new ways to apply distributed ledger technology (DLT) and is preparing for the advent of Markets in Crypto-Assets (MiCA) regulation, bank governor Ignazio Visco told a congress of Assiom Forex, the Italian financial markets association, on Feb. 4. 

DLT may offer benefits such as cheaper cross-border transactions and increased financial system efficiency, Visco said. The Italian central bank “is focused on the need to identify areas” where DLT can contribute to financial stability and consumer protection.

Visco expressed the desire to see regulations that sorted out the crypto-asset market to separate “highly risky instruments and services that divert resources from productive activities and collective well-being” from those that bring tangible benefit to the economy:

“The spread of the latter can be fostered by developing rules and controls similar to those already enforced in the traditional financial system; the former, instead, must be strongly discouraged.”

Visco specifically mentioned “crypto-assets with no intrinsic value” among the former group.

The Bank of Italy is working at the European and global levels to develop the technology and a framework of standards, Visco said. It is also collaborating with Italian securities market regulator CONSOB and the Ministry of Economy and Finance to initiate the “authorization and supervision activities” of MiCA.

Related: EU postpones final vote on MiCA for the second time in two months

Italy recently imposed a 26% capital gains tax on crypto-asset trading over 2,000 euros in 2023. However, Italian taxpayers have the choice of paying a 14% tax on their crypto-asset holding as of Jan. 1. This alternative is intended to incentivize taxpayers to declare their digital holdings.

Visco estimated the number of Italian households that own crypto assets at 2% and said those holdings were “modest amounts on average.”

EU postpones final vote on MiCA for the second time in two months

The final vote was delayed due to issues in the translation of the 400-page legal document.

The final vote on the European Union’s (EU) much-awaited set of crypto rules, known as the Markets in Crypto Assets regulation (MiCA), was deferred to April 2023. It marks the second delay in the final vote, which was previously postponed from November 2022 to February 2023.

The latest delay is due to a technical issue where the official 400-page document couldn’t be translated into the 24 official languages of the EU, according to The Block. Legal documents like the MiCA, which are drafted in English, must comply with EU regulations and be published in all 24 official languages of the union.

The first delay in November 2022 that deferred the final vote to February was also caused by translation issues. A delay in the final vote means European financial regulators must wait longer before drafting the implementation rules for the legislation. Once the MiCA has received official approval, the financial regulators have 12 to 18 months to create the technical standards.

The European parliamentary committee passed the MiCA legislation in October 2022, nearly two years after it was first introduced in September 2020. The second delay comes even when there has been a growing demand for approval of the legislation, especially in the wake of the crypto contagion caused by FTX.

Stefan Berger, a member of the European Parliament’s economics committee, has described the FTX collapse as one of the “Lehman Brothers moments” that “must be prevented,” when arguing for the necessity of regulations such as MiCA.

With MiCA, European policymakers aim to set a standard regulation to establish harmonized rules for crypto assets at the EU level, thereby providing legal certainty for crypto assets not covered by existing EU legislation.

Related: MiCA legislation good news for crypto players — Binance Europe VP

The crypto regulation will establish guidelines for the operation, structure and governance of issuers of digital asset tokens. The legislation will also offer rules on transparency and disclosure requirements for issuing and trading crypto assets.

Belgian MP receives Bitcoin salary for a year: Here’s what he learned

Christophe De Beukelaer considers his experiment successful, as he raised awareness among the local lawmakers.

At the end of January 2022, member of the Belgian parliament Christophe De Beukelaer became the first European politician to convert his salary to Bitcoin (BTC). Celebrating the anniversary of this experiment, Cointelegraph reached out to a lawmaker to know more about his experience. 

Back in 2022, Beukelaer, who represents Humanist Democratic Centre (CDH) party, cited the example of New York City Mayor Eric Adams and how American politicians are working to make their native states or cities Bitcoin hubs to justify his decision. The Brussels MP’s monthly salary of 5,500 euros ($6,140) was to be converted to Bitcoin using the Bit4You crypto trading platform.

Related: Belgium says BTC, ETH and other decentralized coins are not securities

“I did this political act of paying in Bitcoin to defend political ideas,” shared Beukelaer, citing four ones: defending financial freedom and economic opportunity and combating financial illiteracy and growth model. The last one is perhaps the most interesting, as the lawmaker, who called himself a “pragmatic environmentalist,” sees a clear link between Bitcoin and the environmental clause:

“What does the central bank do when it prints money as it has done in recent years? It gives the illusion of infinite resources and thus encourages all economic actors to produce and consume more and more.”

Beukelaer considered his experiment successful in both putting Belgium on the global crypto map and encouraging local officials to educate themselves on digital assets:

 “A lot of politicians said to themselves: ‘De Beukelaer is not an anarchist. If he is interested in Bitcoin, there must be something interesting behind it.’”

Was it comfortable in practical terms? The positive answer is hardly imaginable, given the BTC’s decline from almost $38,000 in January 2022 to $17,246 at the time of publication in January 2023, but the MP didn’t regard his experiment as an economic strategy from the very beginning:

“It was a political act and not a financial gesture. Like those who grow mustaches in November to fight prostate cancer. I put this salary in Bitcoin on a cold wallet every month and I haven’t touched it. My goal was not to live in crypto.”

While the first major step to pan-European regulation is undertaken, Beukelaer highlighted the reservations of the Markets in Crypto-assets legislation: The excessive constraints imposed on the personal holding of crypto or the way stablecoins are considered.

Europe is heading toward hard times, the politician believes, citing the crises in energy supply and climate, and the rise of authoritarian leaders. It is in that regard how Western countries will gradually understand the usefulness of crypto.

ECB official urges CBDC development for the good of cryptocurrency and consumers

ECB board member Fabio Panetta has woven his enthusiasm for blockchain technology and skepticism of cryptocurrency into an argument that supports both, albeit begrudgingly.

European Central Bank (ECB) executive board member Fabio Panetta, a vocal supporter of central bank digital currency (CBDC) and skeptic of cryptocurrency, presented his latest argument for the former on Jan. 5. Writing on the official ECB blog, he said that by developing CBDCs, central banks “will safeguard the trust on which private forms of money ultimately depend.”

Panetta began his argument with a harsh appraisal of cryptocurrency in 2022. “Last year marked the unravelling of the crypto market as investors moved from the fear of missing out to the fear of not getting out,” he said.

That observation served as a segue to an examination of the position that cryptocurrency should be left alone to “burn rather than regulate at the risk of legitimizing cryptos.” But this is a strawman that is immediately taken down:

“First, despite their fundamental flaws, it is not certain that crypto assets will ultimately self-combust.”

Second, “the cost to society of an unregulated crypto industry is too high to ignore,” Panetta wrote, especially for “uninformed investors.” He went on to mention money laundering and environmental harm, and quipped, in the style that characterized the blog post:

“It is not just cryptos that are being burnt.”

Having established the necessity of regulation, Panetta suggested that the European Union’s Markets in Crypto Assets (MiCA) legislation was an important step, but insufficient in regard to crypto asset lending or non-custodial wallet services. In addition, “unbacked cryptos […] should be taxed in accordance with the costs they impose on society,” Panetta said. His solution:

“Trading in unbacked digital assets should be treated by regulators like gambling.”

That treatment would include both taxation and measures to protect “vulnerable consumers.”

Even with taxation and regulation, crypto will have shortcomings, Panetta argued. Only CBDC “a risk-free and dependable digital settlement asset,” and by preserving the role of the central bank, trust in cryptocurrency will be safeguarded, he concluded.

Related: ECB should have DLT wholesale settlements when the market wants it, official says

The ECB blog caught the eye of the crypto community on Nov. 30 with an entry titled “Bitcoin’s Last Stand.” Panetta has previously proposed banning crypto assets that have significant environmental impact.

Coinbase secures VASP registration in Ireland

Operations in the country will be overseen by Cormac Dinan, a former employee of Crypto.com, Deloitte and Citigroup.

Crypto exchange Coinbase was granted permission by the Central Bank of Ireland to act as a virtual asset service provider (VASP), according to a Dec. 21 announcement. The company’s operations in the country will be overseen by Cormac Dinan, a former employee of Crypto.com, Deloitte and Citigroup.

Under the VASP registration, Coinbase Ireland will be subject to the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.

Two Coinbase entities are covered by the VASP registration: Coinbase Europe Limited and Coinbase Custody International Limited. The first provides crypto trading services to European customers, while Coinbase Custody International provides crypto custody services to institutional clients across the region.

Nana Murugesan, vice president for international and business development at Coinbase, commented on the approval:

“Our Irish regulatory approval demonstrates our commitment and collaboration with the Central Bank of Ireland. Coinbase views regulation of the industry as an enabler for crypto’s growth, setting clear ground rules that will create an environment which encourages innovation and strengthens trust in the sector.”

The executive also emphasized the importance of the European Union’s political agreement on the Markets in Crypto-Assets framework in providing one of the most significant regulatory frameworks for crypto worldwide. According to Coinbase, additional registrations or license applications “are in progress in several major markets.”

Related: Regulatory and privacy concerns trail SEC’s threat to Coinbase

In 2018, Coinbase started operating in Ireland after concerns about Brexit’s impacts on its business in EU countries. Since then, the company has been active in various activities, including market operations, compliance, cybersecurity, legal and customer experience. Coinbase obtained its first license in the country in 2019 when Ireland’s central bank granted it an e-money license, securing passporting for customers across the EU and European Economic Area.

Alongside Ireland, Coinbase has dedicated hubs in the United Kingdom and Germany; in the latter country, Coinbase is under scrutiny due to the outsourcing of some of its essential banking operations. In September, the company was registered with De Nederlandsche Bank, the central bank of the Netherlands, allowing the crypto exchange to offer its retail and institutional crypto products in the country.

Crypto trading platform Gemini was the first firm in the space to register as a VASP with the Central Bank of Ireland in July 2022.

France may oblige crypto platforms to obtain licenses

French Parliament will discuss the amendment, canceling the favorable treatment of crypto companies, in January 2023.

Following the global trend of tightening the crypto regulation in the aftermath of recent market failures, France may reassess its eased regime of licensing for digital asset providers. That would challenge the nation’s efforts to present itself as one of the most pro-crypto countries in Europe. 

According to the Financial Times, Hervé Maurey, a member of the French Senate’s finance commission, proposed an amendment to eliminate a clause enabling crypto companies to operate without a full license until 2026. The current regime preserves this possibility even after the Markets in-Crypto Assets (MiCA) came into law in 2024.

Maurey’s amendment will end the option to operate without stringent checks as it will oblige companies to obtain a license from the Autorité des Marchés Financiers (AMF) from October 2023. In his words, the FTX collapse was a game-changer in that regard:

“This led a number of players within the French system to consider that things needed to be supervised more tightly.”

Currently, there are at least 50 registered companies that operate in France without a license from AMF. An ex-member of the AMF board, Thierry Philipponnat, considers the level of investors’ protection within this regime as “very light if not non-existent.” 

Related: French police use Crypto Twitter sleuth’s research to catch scammers

The amendment was adopted by the Senate on Dec. 13 and will head to Parliament deliberations in January 2023. The local industry’s association, Developing the French Digital Asset Industry (Adan), regard the amendment as a sign of “abandoning an industry of the future” by French lawmakers.

The government of Emmanuel Macron, who has recently started his second presidential term, is famous for its vocal support of the digital assets industry. Back in April, before the second round of the presidential election, Macron expressed his faith in the necessity of raising the number of tech unicorns in the country, developing an NFT policy and the “European metaverse.” However, he also shared his skepticism toward the self-regulated financial sector.