The European Union is preparing to deploy MiCAa set of radical regulations which could severely hamper the cryptocurrency industry on the old continent. Let’s see together what this new law provides.
MiCA, what is it exactly?
On March 14, the Economic and Monetary Affairs Committee of the European Parliament spoke about the draft European regulation Markets in Crypto-Assets, says “MiCA”. This new piece of legislation is part of measures on digital finance. In addition, it contains a set of provisions aimed at “to ensure that the Union’s regulatory framework for financial services is conducive to innovation and does not hinder the use of new technologies”.
Lawyer Sonia Oudjhani-Rogez of the Racine firm tells us that: “The key contribution is the creation of a European status of service provider on crypto-assets, inspired by the ‘PSAN’ regime (service provider on digital assets) in France, and the definition of what is a crypto-asset“.
Concretely, the MiCA aims to provide legal certainty and guarantee financial stability. However, it is also important to support innovation and to protect consumers of the crypto sector.
The European Union MiCA bill was finalized last September. MEPs voted 28-1 in favor of the legislation in October and it now has to pass a final vote.
Cryptocurrency investing is offered by eToro (Europe) Ltd as a PSAN, registered with the AMF. Cryptocurrencies are very volatile. No consumer protection.
A clause that could be problematic for influencers
This vast bill covers the cryptocurrency sector in very broad ways. Indeed, from stablecoins to crypto mining, to non-fungible tokens (NFTs) and money laundering, nothing escapes it. However, it also contains clauses that could affect influencers of cryptocurrency.
On Nov. 1, Circle’s director of European strategy and policy, Patrick Hansen, unearthed one of those clauses. According to the fine print, cryptocurrency influencers who comment on social media without disclosure might have problems. If they are considered to benefit from the effects of their actions, this will be considered market manipulation in the EU once the MiCA is in force, he noted.
Crypto influencers beware: Commenting on crypto assets in (social) media without disclosure and profiting from the effects of that will be considered market manipulation in the EU once MiCA is in force.@zachxbt pic.twitter.com/BflVXPazjS
— Patrick Hansen (@paddi_hansen) November 1, 2022
How far can restrictions go?
Even if the terminology remains relatively vague, the EU could make big changes. It could for example include publications such as Elon Musk memes regarding cryptos. Indeed, the whimsical billionaire makes the markets fluctuate with simple tweets, and this, especially with his favorite asset: the Dogecoin.
Reactions are mixed, with some wondering why the same rules don’t apply to other assets.
However, those in favor of this measure have said that there should be more transparency from influencers of crypto-currencies and ” shillers “. The latter designate the personalities who promote “pump and dump” tokens. We can recently mention Ronaldinho who advertised the active World Cup Inu which turned out to be a scam.
How the regulations will be monitored and enforced is also unclear. However, what is clear is that the EU is on the verge of make things much harder for the crypto community and all associated with it.
Regulators are confident this is a move that will make Europe more attractive to the cryptocurrency industry. On November 2, MiCA rapporteur Stefan Berger said that these regulations are necessary if “Europe wants to be a big player in the crypto game“.
“If Europe wants to be a big player in the crypto game, we need this regulation to create trust, to create companies which make some innovation in this whole #crypto sphere,” says @DrStefanBerger.#MiCA
— EPP Group (@EPPGroup) November 1, 2022
New legislation too strict for crypto currencies?
MiCA comes down hard on DeFi in the name of consumer protection. However, this could simply turn it into “TradiFi”, centralizing and controlling all aspects of the sector.
It also aims to regulate stablecoins and their issuance as well as Crypto Asset Service Providers (CASP). This would pave the way for fully regulated exchanges and brokers. Thus, it could possibly prevent fraudulent activity.
The bill introduces three sub-categories of crypto-assets. These are based on the means the token puts in place to stabilize its value against other assets (traditional or digital).
In addition, he boasts the map of the consumer protection. However, the real motivation of the MiCA is the money laundering prevention. To do this, it aims to align the regulation of crypto businesses with the same framework that governs banks.
Finally, given the complexity of the sector, it is unlikely that the MiCA will become law before 2024. However, the cryptocurrency sector is in perpetual evolution and therefore it would not be surprising to see further changes to the MiCA by then.
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