A New Age of European Crypto Regulation: MiCA Laws Took Effect on Sunday

On Sunday, June 30th, the first wave of laws governing digital assets took effect in Europe. 

With the MiCA Regulation (Markets in Crypto-Asset) framework, Europe is now one step ahead of other jurisdictions – including the U.S. – when it comes to providing legal and regulatory clarity for not just one aspect of the digital asset market, but all of it. 

• Markets in Crypto-Assets (MiCA) regulation is a legislative framework established by the European Union with the aim of regulating crypto assets and related services within the region.
  
   
• Adopted in 2023 by the European Parliament, the laws did not take effect until yesterday.

Stablecoin issuers in the European market had complete freedom until June 30th – thing that has clearly changed with EU’s MiCA regulations, set to enforce caps on transaction volumes and value.

Simply explained, this means that asset-referenced stablecoins not pegged to the Euro will need to be discontinued in the bloc.

MiCA regulation's implementation will be taking place gradually, with regulations concerning stablecoins taking effect on June 30th. Later this year, regulations impacting crypto asset service providers will also be introduced – projected for sometime around December 2024.

Small Backstory

In April 2023, the EU Parliament approved MiCA crypto regulation laws, with the main goal of introducing a new era of regulation across the crypto space, which also marked its significance as an industry in Europe’s financial sector.

On June 9, 2023, MiCA regulation has been officially published in the Official Journal of the European Union.

A year later, the first set of regulations is finally coming into full effect – but is this necessarily good news for crypto companies, EU member states, and most importantly, users?

It is no secret that the overall crypto industry has always been scrutinized for its volatility and speculative nature. While regulations might go overboard at times, they still bring a certain level of legitimacy to the industry. 

1. MiCA regulation is as much about job development and economic competitiveness as it is about consumer and market protection. 
   
    

2. MiCA provides regulatory clarity to the entirety of digital assets market across the Eurozone, making Europe one of the very first Western countries to implement a clear framework that crypto exchanges, digital assets companies, and stablecoin issuers alike can adopt to remain compliant.

    

So... What Now?

Euro-dominated stablecoins will be replacing the dollar-denominated variant. Under this new set of rules, stablecoins will now be treated as electronic money, which will subject issuers to the same levels of compliance as traditional banks and money transmitters.

The framework most certainly pushes for bold reforms, but its main concern is protecting the European investor by requiring digital service providers to obtain licences as either Digital Asset Service Providers (DASP), Virtual Asset Service Providers (VASP), or Crypto Asset Service Providers (CASP).

MiCA regulation is definitely a step forward, and puts the EU at competitive advantage compared to the U.S., who’s still struggling to find a regulatory ground that is convenient to all concerned participants of the crypto market.

However, it is important to keep in mind that MiCA regulation does not come without fault. Some of the disadvantages that may pose a problem later on are the cost of compliance, which could constitute a burden to smaller crypto exchanges and service providers. Not only this, but vague stipulations around DeFi, and a lack of flexibility in some stipulations (like those around stablecoins) are also factors to consider.