The European Parliament adopted the European Market Regulation for Cryptoassets (MiCA) on April 20.

It is reported that the European Union is the first major jurisdiction in the world to introduce a comprehensive encryption law. Not long after it was passed, the US Congress sent more than a dozen congressional staff to understand the new EU encryption legal framework.

MiCA is a large and wide-ranging law at the heart of wider EU legislation governing cryptocurrencies, and a landmark feat that will provide legal certainty to companies that have or wish to operate in the EU. Or provide reference for other countries.

secondary title

1. Main content of MiCA regulations

1. Encrypted asset transactions, token issuance and sales should be transparent. This section is mainly aimed at cryptocurrency trading platforms. For example, CZ said, "It is ready to adjust the business in the next 12-18 months to make it comply with MiCA regulations." According to the rules, trading platforms must The project tokens on the line are "responsible", IEO will be supervised, and there will be higher disclosure standards in terms of assets and information.

2. Unified rules, streamlined risk control and governance. MiCA will require any company offering encryption-related services in the EU to be registered in one of the EU's member states, which will then allow them to operate across the bloc. The European Banking Authority and the European Securities and Markets Authority (ESMA) will be responsible for ensuring that crypto platforms comply with the rules, including having adequate risk management and governance processes in place to avoid a recurrence of events like FTX.

3. Stablecoins must have sufficient reserves to limit transaction volume. Stablecoins such as USDC will need to maintain sufficient reserves to meet redemption requests during large-scale withdrawals, and stablecoins that are too large also face a transaction limit of 200 million euros ($220 million) per day.

4. Wallet company supervision requires an operating license. One of the biggest changes for users is that the bill allows tracking of transactions over 1,000 euros ($1,097.55), from self-hosted wallets to centralized wallets, such as those hosted on cryptocurrency exchanges. Combating money laundering requires services to screen, record and communicate information about senders and receivers.

5. MiCA also addresses environmental issues surrounding encryption, with companies needing to disclose their energy consumption and the environmental impact of digital assets. This is a compromise move after lawmakers removed a blanket ban on proof-of-work mechanisms from an earlier draft.

secondary title

2. The actual response of MiCA and the policy progress in other regions

On the regional/country front, France said it would provide cryptocurrency companies registered in France with a fast-track to comply with stricter MiCA rules, including stricter governance, consumer protection and financial stability rules. Under MiCA, companies already registered in France will be given an additional 18 months to comply with the stricter MiCA rules.

There has been no response from other EU member states.

The Ukrainian regulator said it would adopt the MiCA regulatory framework, a move that would allow crypto assets to be legalized in Ukraine.

The U.S. cryptocurrency community, led by Coinbase, believes that the SEC has stifled innovation in cryptocurrencies and that the United States is losing its status as a financial center. Their preferred legislation usually protects encrypted assets from the jurisdiction of the SEC. A congressional delegation traveled to Brussels and Paris tasked with understanding the EU's new legal framework for encryption.

On April 27, the U.S. Congress bill called on the federal government to study cases of cryptocurrencies being used for illicit activities and make recommendations on how to reduce those uses.

In the encryption circle, CZ tweeted, "The European Parliament voted to implement MiCA. This means that one of the largest markets in the world is introducing tailor-made encryption regulations to protect users and support innovation. The details are important, but the general We see this as a pragmatic solution to the challenges we all face. There are now clear rules of the game for cryptocurrency exchanges operating in the EU. We are ready to Businesses are adjusted to be fully compliant."

On October 10, 2022, the European Parliament Committee preliminarily passed the MiCA Act. Martin Bruncko, Executive Vice President of Binance Europe, believes that the cryptocurrency landscape in Europe is currently fragmented, and the 27 countries in the EU have different regulatory systems. Firms are financially and time demanding to ensure they are fully compliant across different jurisdictions. "That's why we're actually excited about the MiCA because it's creating a single market. "

While MiCA is controversial, it has also put significant pressure on the UK to provide operational clarity on cryptocurrencies. With the launch of MiCA, Andrew Griffith, the U.K. finance minister for the economy, said the government hopes to enact specific legislation on cryptocurrencies within the next 12 months.

On April 27, the British Taxation Office proposed legislative changes to DeFi lending and pledge taxation.

The UK’s post-Brexit economic strategy is set out in the Financial Services and Markets Act passed by Parliament, which contains provisions regulating cryptocurrencies as financial instruments and stablecoins as payments. A consultation on potential regulation for the industry, published in February, suggested broad consumer protection rules.

Hong Kong, China has also frequently "shot" recently. The Hong Kong Securities Regulatory Commission will issue license guidelines for cryptocurrency exchanges in May. All central virtual asset trading platforms that operate in Hong Kong, China or actively promote to Hong Kong investors will need to be licensed by the Securities and Futures Commission. Operators of virtual asset trading platforms (including existing platforms) that plan to apply for a license should begin to review and modify relevant systems and monitoring measures to prepare for the new system. Operators who do not intend to apply for a license should start preparing for the orderly termination of their operations in Hong Kong.

secondary title

3. How does the encryption industry view MiCA?

Regarding MiCA, the encryption industry's attitude is not completely unanimous. Some believe that MiCA can have a positive impact on the development of the cryptocurrency market, while others worry that the implementation of MiCA may have a negative impact on the industry.

Proponents argue that MiCA will provide a clear legal status and framework for the cryptocurrency market, potentially help attract more traditional investors and promote standardization and transparency in the industry. Additionally, mandating crypto service providers to implement stringent AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) measures could help mitigate the risk of cryptocurrencies being used for illicit activities and increase public trust in the industry.

Opponents of MiCA argue that its implementation could limit the freedoms of cryptocurrency firms and increase regulatory costs. MiCA also requires exchanges to register and adhere to strict operating standards, which may cause some smaller exchanges to withdraw from the market. In addition, MiCA may put the European cryptocurrency market at a disadvantage compared to other countries or regions with more relaxed regulatory policies.

In addition to the above pros and cons, some have raised more specific and in-depth questions about MiCA, such as:

• Will MiCA have an impact on existing cryptocurrency projects?

• Are MiCA’s measures to regulate new models of cryptocurrency funding such as ICOs and STOs adequate?

• secondary title

4. Implementation progress of MiCA

The EU Council will hold a formal vote on May 16 to finalize it into law. European Financial Services Commissioner Mairead McGuinness expects the legislation to come into force in July after formal approval by the 27 EU member states, with specific provisions to be implemented gradually.

secondary title

V. Conclusion

Taken together, the implementation of MiCA may have both positive and negative impacts on the crypto industry. On the one hand, MiCA helps to enhance the transparency and compliance of the entire cryptocurrency market and improve the level of investor protection. On the other hand, MiCA may also adversely affect some small cryptocurrency companies, and may even increase the degree of monopoly in the cryptocurrency market. In general, the implementation of MiCA needs to be carried out on the basis of fully considering the interests of all parties in order to achieve a balanced and fair regulatory effect.