Every country in the world has had a different approach to the crypto sector. Some have espoused blockchain and the relatively new Distributed Ledger technology. While others like China have banned trading in it while working on developing new blockchains.
In short, the global landscape is very diverse and we believe it will change again. But in Europe? The new regulation is named MiCAR and contains a number of new things we need to know about.
Let’s get to know its contents.
The first cryptocurrency regulation: Mica
What we have today is the result of work rooted in one of the toughest years ever for all cryptos. In fact, the new crypto regulation was first made official in the summer of 2022, under the name Mica.
This step represented, not only a defining moment for Europe, but the first ever regulation of its kind. Some guidelines had already been given. But, as we knew, the finalization of the framework would not occur until 2023.
And here we are. All set to welcome Europe’s final and first cryptocurrency regulatory framework: the MiCAR. Here are some of the details of most interest to companies and individuals.
MiCAR arrives: final cryptocurrency regulation
Against a backdrop of economic and financial uncertainty that sees the world falling prey to a widespread crisis, Europe is trying to put some ground rules in place. Indeed, the new crypto regulation aims to better protect consumers and give clear guidelines to providers and investors.
Of course it also aims to protect the traditional financial system, but with an open door to the future on blockchain.
MiCAR refers to all digital rights, or values, that can be issued, distributed and stored electronically through Distributed Ledger Technology or similar technologies. This includes all technologies that will be developed in the future and meet the purpose.
Cryptocurrency regulations: 3 separate sections
This is a very large document, but we will try to collect the sections of greatest interest.
In fact, the regulations deal with 3 different types of “cryptocurrencies”:
- unbacked cryptocurrencies;
- utility tokens.
To the first section belong the already well-known cryptos pegged to an underlying asset, such as Tether (USDT). Here the regulation creates a distinction between the more classic e-money tokens, i.e., those having a fiat currency as underlying and all others called asset reference tokens.
At the second instead the better known Bitcoin, Ethereum, etc. And finally the Utility Tokens will be those giving access to goods and services.
Difference for token issuance
Here another novelty comes into play: the nature of the crypto asset. Anyone who wants to issue a digital currency, such as the more classic cryptocurrencies Solana, Ripple, Bitcoin, Matic, etc., will simply have to submit a white paper. Because no specific authorization is required.
Different story for asset reference tokens, which have to submit a special application so as not to create problems for the ECB. As for e-money tokens, however, these will only be issued by banks and digital currency institutions.
This is a clear framework that finally places cryptos in their set of belonging. This way there will be no mistakes or misunderstandings.
Cryptocurrency providers: how does it work
The matter is simplified here as well. For all companies, exchanges, and private institutions that offer services regarding cryptocurrencies, the MiCAR regulation does not differentiate as to the type of digital currency handled.
There is a specific authorization regime that, in the case of digital assets that are not used to pay, refer to MiFID, the European institution that regulates the financial market in the EU.
That’s as far as it goes at the moment, as we await the entry into force a few weeks from now, these are the key points.
MiCAR: how long to comply?
The time is ripe, but it will still take a while to see the cryptocurrency regulation up and running.
It will not take much more than a few weeks to see it go into effect, but it will take 12 to 18 months to see it 100 percent operational.
For those who will have to adapt to the new regulatory framework, however, everyone is required to catch up before the end of 2024. It seems like a long time, but laws can require some complex changes for businesses and individuals, so let’s wait and hope for the best.