On Thursday, MEPs approved Regulation (EU) 2019/1937 on Crypto Assets Markets by a majority of 517 to 38. Though probably mainly known to insiders as of yet, the regulation, called MiCA (short for Markets in Crypto Assets), represents nothing less than the world’s first comprehensive regulation for the crypto sector.
It governs – starting July in a phased 18-month introduction period – the tokenisation of transferable assets or rights and defines uniform requirements for transparency and disclosure in relation to the issuance activity, operation, organisation and governance of crypto asset service providers.
In addition, consumer protection rules and measures to prevent market abuse are part of it.
MiCA is also an important step towards fair competition in the spirit of the regulatory principle of “same activity, same risk, same rules”. Because for companies that provide services in connection with crypto values, which are considered financial instruments according to the EU’s MiFID directive, in addition to the requirements from MiFID itself, the Prospectus Regulation, the Transparency Directive, the Market Abuse Regulation, the Short Selling Regulation, the Central Securities Depositary Regulation and the Settlement Finality Directive are already applicable.
“For a long time, legislators in many jurisdictions around the world have been very reluctant to take up the issue of regulating the crypto sector – probably for two main reasons,” explained Alpay Soytürk, Chief Regulation Officer at Spectrum Markets. “On the one hand, the topic is complex, not just from a technological but also from a legal perspective due to the interconnectedness with existing legal norms from several disciplines. On the other hand, no economic area wanted to fall behind in the competition for domiciling companies in this promising sector by imposing overly restrictive laws.”
This is something that many institutional participants in the digital assets market have been waiting for. The EU is taking the lead in this with a regulatory framework based on tried and tested norms that already govern regular trading venues.
- Copper opens in Liechtenstein to provide digital assets custody service
- Snap investment decisions and FOMO are leading to bad outcomes
- REX Financial to use call writing strategy in new crypto sector ETF
Possible future regulatory blue print for other countries
However, there seems to be a growing consensus that a uniform and binding legal framework is the main ingredient of a competitive location policy. For the same reasons, the initiative is remarkable and to be welcomed at the same.
“It is not just consistent with existing financial market legislation but practice-oriented, too – after all, its originator is the European Union, otherwise often accused of bureaucracy and sluggishness,” Soytürk said. “The fact that the EU has achieved a competitive advantage by adopting this law will become evident in the coming years when other countries around the world will use MiCA as a blueprint for their crypto regulation.”
The Armchair Trader attended a fund management conference in London this week, at which the new EU moves came up for discussion with those managers who already have some level of exposure in crypto assets. Their view was that there will be considerable benefits for the sector, now that an element of uncertainty has been removed from the table. This should also benefit retail investors, as it is another important building block in the bridge that will bring institutional money into the market.
