On Monday 10 October, the deputies of the Economic Committee of the European Parliament voted by a large margin, 28 votes to one, for the adoption of the MiCA regulation (for Markets in Crypto-Asset). The text must now be submitted to a final vote by all the members of the European Parliament later this month. Industry players will then have between 12 and 18 months to comply (depending on their circumstances). The entry into force of the text will therefore take place at the earliest at the beginning of 2024.
This text, which constitutes the first attempt at large-scale regulation of the cryptocurrency market in the world, aims first of all to harmonize the various regulations that exist today within the countries of the European Union.
Homogenize regulations
The text thus creates the concept of service providers on cryptoassets (Casp), inspired by that of service provider on digital assets (Psan), supervised by the AMF in France since the Pacte law of 2019.
Companies affected by this status, including digital asset marketplaces (such as Binance or Crypto.com) and token creators, will have to apply for a license from a Member State of their choice, which will then allow them to operate throughout the Union. This system aims to better regulate the market and protect consumers, but also to simplify the existence of companies, which are faced with a real legislative imbroglio.
” Today, if you are a company that wishes to offer an offer around cryptocurrencies in Europe, you must ensure that you comply with the laws in force in each country, some of which have fairly flexible regulations, such as Italy and Spain, others draconian, like Germany. You are therefore forced to fight on several fronts. decrypts Émilien Bernard-Alzias, associate lawyer at Simmons & Simmons.
” In addition, each time one of these countries asks you to modify one of your procedures or a step in your customer journey, you are forced to apply this change to all the countries where you operate, since the principle of is to offer a unique journey to customers, wherever they are. It’s a real headache for companies, which MiCA will solve “, continues the specialist in financial services regulation.
Of the stablecoins better framed
MiCA’s other major ambition is to supervise more closely the stablecoins, those cryptocurrencies that are backed by a single real currency (in this case, the euro), a basket of currencies, a resource such as gold or lithium, or even a stock market index. Companies wishing to issue a stablecoin will therefore have to write a white paper explaining their project and demonstrating its financial solidity. The level of requirements of the European authorities will vary according to the type of stablecoinsthe strictest rules being provided for cryptocurrencies backed by the euro, which MiCA designates under the label electronic money tokens.
” Companies wishing to issue this type of stablecoin will, for example, have to build up much greater equity to guarantee their solvency, or even be approved as a credit institution or issuer of electronic money depending on the circumstances. As these tokens are intended to replace the currency, they have a much greater destabilizing potential. Some, like Tether or USDC, both backed by the dollar, represent trading volumes of tens of billions of dollars. It is therefore logical that the law is stricter towards them “, notes Emilien Bernard-Alzias.
MiCA does not regulate stablecoins indexed to a currency other than the euro. According to the lawyer, in addition to offering better protection to investors, this framework for stablecoins will also allow European authorities to better control cryptocurrencies backed by the single European currency. ” Today, when you make a transaction in dollars, you are immediately overtaken by the extraterritorial character of American laws. With the euro, on the other hand, you go under the radar. There are many stablecoins that replicate the course of the euro without anyone getting upset or the ECB having a say. From now on, it will become possible to control foreign actors more closely to ensure that they do not do anything with the euro. »
A danger for the competition?
The MiCA regulation also attracts its share of critics, some claiming that we risk killing the market in the bud by regulating it too early, others, like the LREM deputy Pierre Person, judging the text too vague and insufficient. Last March, he told us that Europe was shooting itself in the foot with this regulation. But for Dimitrios Psarrakis, who worked as a specialist in finance and blockchain regulation at the European Parliament, the text will precisely offer the European crypto ecosystem better conditions to develop.
” The establishment of a law on tokens and the services surrounding them was necessary for the market to thrive. The United States have decided to postpone this deadline, and now find themselves in a chaotic situation from which the FED, the SEC and the Treasury are trying to extricate themselves. “, he says.
An observation shared by Émilien Bernard-Alzias. “ The market has been free for ten years, today what players want are clear rules and stability, the certainty of being able to do business without risking being sanctioned by an overzealous regulator. In the United States, where there is currently no clear regulation, the SEC, for example, has just told the founders of the Bored Apes Yacht Club that their NFTs are financial instruments and that they must therefore comply with the corresponding regulations, which puts them in a very delicate position. The image that this sends back to the market is that the American regulator can fall on you at any time… Conversely, in Europe, we draw up a clear framework which certainly requires effort at the beginning, but offers you then a boulevard to do business », Analyzes the lawyer.
Can MiCA be emulated?
For Dimitrios Psarrakis, the law thus has every chance of serving as an example in the rest of the world. ” I think MiCA can become a benchmark for major jurisdictions looking to regulate cryptoassets. Not because it is an irreproachable regulation, but because it is the first of its kind. The EU thus helps to set the tone for how markets should operate. I expect MiCA to have the same effect as GDPR did a few years ago. That’s what we call “the Brussels effect“: the fact that the EU automatically imposes these regulations on other jurisdictions. »
A reality of which the Americans are well aware. This summer, the former director of the Commodity Futures Trading Commission (CFTC, which regulates the derivatives market), Chris Giancarlo, thus stressed that his country risked being left behind in the regulation of cryptocurrencies if it did not quickly adopt its own laws, the approach promoted by MiCA s then de facto exporting to the United States.
TFR and the “travel rule”
MiCA is not the only law that aims to weave a clear legal framework for the cryptocurrency market. The TFR (Transfer of Funds Regulation), also in the process of being adopted by the European Parliament, is intended to fight against the use of cryptocurrencies for money laundering or the financing of terrorism. It will force any payment provider involved in a transfer of cryptocurrencies to identify the originator as well as the beneficiary, but also to stop the transaction if one of the two is on an international sanctions list.
This is called the “travel rule”, which will apply when a user makes a transfer between 2 Casp (cryptoasset service providers), from the first euro. However, it does not apply to peer-to-peer exchanges. Among the information that the Casps will have to transmit, there is in particular the surnames and first names of the user, the destination wallet, their account numbers on the platforms, their postal address, their identity number (identity card or passport) , as well as his date and place of birth. This law should come into force at the same time as MiCA.