New Brussels legislation seeks to put an end to scams and turmoil that have characterised markets like bitcoin, but few if any seem set to comply.
The EU’s landmark regulation for crypto takes effect within the week – and it doesn’t seem that any major specialised players have succeeded in getting authorised.
The new regime offers players like exchanges and wallet providers the chance to apply for a license that will let them operate across the bloc.
Brussels has crowed about being the first global jurisdiction to set tailored rules for the cryptocurrency market – one that’s seen significant turbulence and manipulation.
But, with the clock ticking down, the jury’s still out on whether the EU’s Markets in Crypto Assets law, MiCA, heralds a new era for the industry – or will kill it stone dead.
After agreeing the law in June 2023, France’s finance minister Bruno Le Maire said the landmark legislation will “prevent the misuse of crypto-assets, while being innovation-friendly to maintain the EU’s attractiveness”.
A few months later, lead lawmaker Stefan Berger (Germany/European People’s Party) said the rules “put the European Union at the forefront of the token economy worldwide”.
Many cryptocurrency users have long rejoiced in its freedom from government control – even if some recognise that regulatory recognition could offer extra credibility and certainty.
As the prospect of applying finance-style rules looms ever closer, the mood in the industry is getting more anxious.
Difficult and uncomfortable
“It’s a difficult and uncomfortable period,” Faustine Fleuret, president of French crypto lobby group ADAN, told Euronews, citing norms that are both tough and unclear.
That gloom is shared by Marina Markezic, founder of the Brussels-based European Crypto Initiative, who points out that many crypto companies still haven’t told their customers exactly how the law will work.
On 3 June, Binance, one of the world’s leading crypto exchanges, said it would be restricting access to unauthorised crypto coins once MiCA kicks in, but others haven’t been as frank, she said.
“There is a week until 30 June and I, as a consumer, still don’t know what’s going to happen,” said Markezic.
A big chunk of MiCA is dedicated to stablecoins – crypto assets that seek to peg their value to other assets, such as the price of gold, or the US dollar.
Those are the toughest parts of MiCA and the first to take effect – other provisions, such as licenses for exchanges, start on 30 December.
But there’s still an argument about what the rules actually mean – for example, whether handling stablecoins means you have to register as a payment provider, Fleuret says.
Short notice
Worse still, Fleuret says, the European Banking Authority (EBA) only published its final set of technical standards last week, giving operators scant chance to prepare.
“Less than two weeks before the entry into application of a big, big, brick of the MiCA regulation, the people that have to comply with it did not even have all the operational details that they need to get compliant,” she said.
“For the newcomers, it’s really much more complicated to be ready on 30 June, maybe impossible,” she said – though she concedes that existing licensed payment providers might be in a better position.
A spokesperson for the EBA told Euronews that the EU agency has finalised and published all 18 sets of standards and guidelines ahead of the 30 June deadline.
“The EBA has been calling on the industry to prepare on a timely basis” for the new stablecoin regime, and had offered a tool to allow companies to resolve questions of interpretation, the spokesperson added.
No approvals?
Bearing out Fleuret’s analysis, Euronews hasn’t identified any major crypto players that have definitely been approved under MiCA.
Back in April, Paolo Ardoino, CEO of stablecoin issuer Tether, said he was “still discussing with the regulator” his concerns over the law. Circle, whose euro-backed stablecoin seems intended for EU users, announced last year that it had applied for a MiCA license.
With one week to go, neither company has publicly announced they’ve secured regulatory approval; neither responded to Euronews’ request for comment.
Both Markezic and Fleuret are still positive about some aspects of MiCA, which in particular will let crypto businesses operate across Europe with a more-or-less clear framework.
But Fleuret worries the law isn’t adapted for the smaller players that tend to dominate the space.
“The problem of MiCA is that it is not proportionate,” she said. “If you are a startup that tries to launch market activity right now, you would have to apply the same rules as Societe Generale,” a French bank that’s also venturing into financial-technology.
And, for all the EU’s bluster about promoting innovation, the tough hurdles seem like a feature rather than a bug.
Big tech fears
Those crafting MiCA were motivated partly by fears that Facebook might issue its own form of money, Libra, tied to a basket of major world currencies.
Finance ministers railed against the idea of a foreign big tech giant creating a currency that could supplant the euro.
Facebook’s project crumbled, not least due to the political backlash – but regulators’ fears were borne out in spring 2023, when Terra, a stablecoin that supposedly maintained its value with the US dollar, tumbled under market pressure, bringing much of the crypto ecosystem down with it.
The final version of MiCA imposes strict reserve requirements on stablecoins based on the euro, and a cap of a million daily transactions for others.
But that may run headfirst into existing arrangements, as operators don’t always monitor that information, Markezic says.
“Issuances are happening globally, and there was no system before for how to align or set up or look into … how much is issued within a specific jurisdiction,” she said. “Sometimes the issuers do not know who is holding these tokens.”
Tough few years
Crypto’s had a tough few years. After the Luna crash came a period of turbulence and regulatory backlash, and many of the industry’s figureheads are now in jail.
In the US, Sam Bankman-Fried was recently sentenced to 25 years after pleading not guilty to fraud and money laundering during his time running the doomed FTX crypto exchange.
Likewise Changpeng Zhao, Binance’s founder, was handed a four-month term after pleading guilty to money laundering.
All of that may have tarnished crypto’s reputation, but Markezic is confident that legal credibility could herald a new era.
Established providers such as banks “have been waiting for regulation”, she said, with a clear rulebook potentially bringing the technology out of its current, somewhat nerdy, niche.
“I think that we will speak less about the technology and less about stablecoins and … more about the utility and what can it bring to the consumer,” she said. “There’s many advantages when it comes to seamless transactions, 24/7 processes, and so on.”
But even she acknowledges there’ll be bumps in the road from today’s Wild West to mainstream credibility.
“A lot of companies will not have the capability of being compliant,” she said. “Very small startups and innovative companies will probably limit their activities in the EU.”
