For several years, cryptos have experienced particular growth which is reshaping the global financial ecosystem. This dynamic which is part of the spirit of the times was, until recently, largely hampered by the absence of regulation of the crypto sector. A situation has posed risks of anarchy and caused some catastrophic events in recent months. To address these concerns, the European Union (EU) has taken the lead by introducing its Markets in Crypto Assets (MiCA) Regulation. At a time when several analysts are anticipating a bull run in the crypto market, many specialists believe that the MiCA law will be one of the catalysts for this dynamic. Let’s analyze this in light of the potential for unprecedented crypto regulation, soon to be fully operational.
Retrospectives on the MiCA and the ambition of its normative contributions
Enacted in July 2023, MiCA establishes a regulatory framework for the European crypto landscape. This law is in some ways the missing link in the European Commission’s policy on digital finance. A strategy which notably includes a pilot legislative proposal aimed at exploring distributed ledger technology in the exchanges and settlement of financial services.
The MiCA therefore fundamentally emerges as a sort of unprecedented financial panacea. This is especially true since its scope goes beyond traditional financial regulations, to encompass all crypto-assets. But not only since its regime also extends to securities and electronic money, which are currently not covered by existing European regulations. Not to mention, this law also applies to Crypto Asset Service Providers (CASPs) operating within the European crypto industry, regardless of their location.
As we can see, the MiCA aims to be as exhaustive as possible in regulatory matters. This is by design, because its overall objective is to provide regulatory clarity without neglecting to protect investors from the misuse to which cryptos are often subject. This is why it promotes compliance with the rules relating to the fight against money laundering and the financing of terrorism.
The ambition is more broadly to maintain financial stability and protect players against abuse and market manipulation. A way to promote a safer and more innovative crypto sector. It is true that fundamentally, MiCA fills a legal void when it comes to cryptos. However, it excludes certain specific areas from its scope. This is the case for NFTs, for example. This is also the case for decentralized autonomous organizations (DAO) and decentralized financial operations (DeFi) except under certain conditions. This does not prevent MiCA from being seen as one of the pillars of the bull run envisaged for the crypto market in the months to come.
The MiCA standard, seen as a catalyst for the next crypto bull run
With the MiCA standard, the EU has struck very hard from a legal point of view. It is, in fact, one of the rare pieces of legislation in the world to regulate crypto activities in such an exhaustive manner. Even if everything is not perfect, this progress is widely welcomed by players in this industry around the world. And in a context of slippage in American crypto regulation, experts are unanimous in saying that MiCA will support the attractiveness of Europe’s crypto market. Now, crypto behemoths see this region of the world as one of the most favorable places for their activities to flourish. And for good reason, the MiCA has the exceptional advantage of establishing a body of crypto rules valid for the 27 EU states. With this unified structure, crypto firms no longer need to worry about specific, often disparate regulations.
In these circumstances, a massive influx of crypto firms is anticipated by experts, once MiCA is fully operational. This is currently not the case. While the crypto market has experienced something of a resurgence in recent weeks, many experts believe that the MiCA law will be one of the catalysts for the next bull run.
They explain this by the fact that the emergence of standards such as MiCA could break the current dynamic of regulatory uncertainty. A trend which would have the effect of attracting several conservative institutional investors who have remained withdrawn from this crypto ecosystem. As a result, this could pave the way for a new cycle of mass adoption of cryptos which would propel prices to new heights thanks to an influx of capital. In certain European countries such as France, we are actively preparing for this prospect.
What about the transitional period towards the MiCA: Case of France
In France, the institutions responsible for financial matters, notably the Financial Markets Authority (AMF), pay particular attention to the MiCA. They welcome this text by actively working on the transition towards it. Said transition to the MiCA regulatory framework is organized in accordance with the law containing various provisions for adaptation to European Union law known as the DDADUE law.
This standard specifies provisions related to MiCA, in particular by granting a transitional period of 18 months to Digital Asset Service Providers (PSAN). In particular those benefiting from simple registration, reinforced registration, optional approval or providing specific services.
According to this law, these actors can maintain their services exclusively in France during this period. It also empowers the government to take steps, within one year, to adapt national law to the MiCA.
Furthermore, in collaboration with stakeholders, the AMF should adjust its regulations and its doctrine in order to align the PSAN authorization requirements with the MiCA. This, by clarifying its policies and examining the possibility of modular approval.
It should be noted that the MiCA comes into full force from June 2024, with application planned from January 2025. With this in mind, the AMF is also working with the Prudential Control and Resolution Authority (ACPR) to facilitate the transition from the French framework to the European framework. All this, by actively participating in the development of implementing texts with the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). These texts will be subject to public consultation before their final publication in 2024. This should allow players in the crypto industry to comply with technical standards before the MiCA comes into force.
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