Regulation
Entry into force of the law on cryptocurrencies: prepare for a journey strewn with pitfalls
Brussels’ new legislation aims to end the scams and unrest that have characterized markets like bitcoin, but few, if any, appear willing to comply.
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The EU’s landmark crypto regulations come into force this week – and it doesn’t appear that any major specialist players have managed to secure authorization.
The new regime offers players such as exchanges and wallet providers the opportunity to apply for a license that will allow them to operate across the bloc.
Brussels has boasted of being the first global jurisdiction to establish tailor-made rules for the cryptocurrency market – a market that has seen significant turbulence and manipulation.
But with time running out, the jury is still out on whether Europe’s Crypto Asset Markets Act, MiCA, heralds a new era for the industry – or whether it will kill it altogether.
After passing the law in June 2023, French Finance Minister Bruno Le Maire said this landmark legislation “will prevent the misuse of crypto-assets, while being supportive of innovation to maintain the attractiveness of the EU”.
A few months later, top lawmaker Stefan Berger (Germany/European People’s Party) said the rules “place the European Union at the forefront of the token economy worldwide.”
Many cryptocurrency users have long welcomed its independence from government control, although some recognize that regulatory recognition could provide additional credibility and certainty.
As the prospect of implementing financial-type rules draws ever closer, the mood in the sector is becoming increasingly anxious.
Difficult and uncomfortable
“It’s a difficult and uncomfortable time,” Faustine Fleuret, president of French crypto lobby group ADAN, told Euronews, citing standards that are both strict and unclear.
This sadness is shared by Marina Markezic, founder of the Brussels-based European Crypto Initiative, who points out that many crypto companies still have not explained to their customers exactly how the law will work.
On June 3, Binance, one of the world’s leading crypto exchanges, said it would restrict access to unauthorized crypto coins once MiCA goes into effect, but others have not been so outspoken, she declared.
“There is a week left until June 30 and I, as a consumer, still don’t know what is going to happen,” Markezic said.
A large part of MiCA is dedicated to stablecoins – crypto assets that seek to tie their value to other assets, such as the price of gold or the US dollar.
These are the strictest parts of MiCA and the first to come into force – other provisions, such as exchange licenses, come into force on December 30.
But there is still debate over what the rules actually mean – for example, whether managing 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, leaving operators little time to prepare.
“Less than two weeks before a big, big piece of the MiCA regulation came into effect, the people who have to comply didn’t even have all the operational details they needed to become compliant,” she declared.
“For new arrivals, it’s really much more complicated to be ready by June 30, if not impossible,” she said – although admitting that existing approved payment providers might be in a better position.
An EBA spokesperson told Euronews that the European agency had finalized and published the 18 sets of standards and guidelines before the June 30 deadline.
“The EBA called on the industry to prepare in a timely manner” for the new stablecoin regime and proposed a tool for companies to resolve questions of interpretation, the spokesperson added.
No approval?
Confirming Fleuret’s analysis, Euronews has not identified any major crypto players definitively approved by the MiCA.
Last April, Paolo Ardoino, CEO of stablecoin issuer Tether, said he was “still talking with the regulator” about his concerns about the law. Circle, whose euro-backed stablecoin appears aimed at EU users, announced last year that it had applied for a MiCA license.
With a week to go, neither company has publicly announced that it has received regulatory approval; neither responded to Euronews’ request for comment.
Markezic and Fleuret remain positive on certain aspects of MiCA, which will notably allow crypto companies to operate throughout Europe with a more or less clear framework.
But Fleuret fears that the law is not adapted to small players who tend to dominate the space.
“The problem with MiCA is that it is not proportionate,” she said. “If you are a startup trying to launch a business into the market now, you will have to apply the same rules as Société Générale,” a French bank that is also moving into fintech.
And for all the EU’s bluster about promoting innovation, difficult hurdles seem to be a feature rather than a bug.
The big technological fears
Those who created MiCA were motivated in part by fears that Facebook might issue its own form of currency, Libra, tied to a basket of major global currencies.
Finance ministers have spoken out against the idea of a major foreign tech giant creating a currency that could supplant the euro.
Facebook’s project collapsed, partly because of political backlash, but regulators’ fears were confirmed in the spring of 2023, when Terra, a stablecoin meant to maintain its value against the US dollar, fell under pressure of the market, leading to the downfall of a large part of the crypto ecosystem. with that.
The final version of MiCA imposes strict reserve requirements on euro-based stablecoins, and a cap of one million daily transactions for others.
But this could clash with existing provisions, as operators do not always monitor this information, says Markezic.
“Issuance occurs globally, and there was previously no system to align, implement or review… the amount issued in a specific jurisdiction,” he said. she declared. “Sometimes issuers don’t know who owns these tokens.”
A few difficult years
Crypto has had a rough few years. Following the Luna crash, there was a period of turmoil and regulatory backlash, and many of the industry’s leading figures are now in prison.
In the United States, Sam Bankman-Fried was recently sentenced to 25 years in prison after pleading not guilty to fraud and money laundering while running the doomed crypto exchange FTX.
Similarly, Changpeng Zhao, the founder of Binance, was sentenced to four months in prison after pleading guilty to money laundering.
All of this may have tarnished crypto’s reputation, but Markezic is confident that legal credibility could herald a new era.
Established providers such as banks were “waiting for regulation,” she said, with a clear rulebook that could move the technology out of its current, somewhat cheesy, niche.
“I think we’ll talk less about technology and less about stablecoins and… more about utility and what it can bring to the consumer,” she said. “There are many benefits when it comes to transparent transactions, 24/7 processes, etc. »
But even she acknowledges that there will be obstacles on the path between today’s Wild West and mainstream credibility.
“Many businesses will not have the capacity to comply,” she said. “Very small startups and innovative companies will likely limit their activities in the EU.”