The European Union’s (EU) Markets in Crypto Assets (MiCA) is being seen as the world’s first comprehensive set of rules that aims to bring the largely unregulated cryptocurrency markets under government regulation. The regulation is part of a broader digital finance package known as the Digital Operational Resilience Act (DORA), which is designed to protect the financial services sector against fraudulent activities. DORA is expected to become law in July 2023, setting in motion the rules to take effect by January 2025 in stages.
In contrast to the United States’ struggle to clarify the nature of digital assets, the European Union is focusing on regulating the industry. The approach may prove to be a game-changer, with several markets and jurisdictions using MiCA as a precedent to become more competitive in the global market.
MiCA will set high standards for consumer protection, benefiting customers from a more reliable and trustworthy crypto market. The new regulation will also serve as a catalyst for attracting start-ups and prominent businesses, setting the stage for more healthy competition. Rules on governance will increase transparency, and safeguards against market manipulation will increase market integrity, according to experts.
MiCA will introduce stringent measures to promote a secure, transparent, and fair crypto market, including disclosures of inside information, strict prohibitions of insider dealing, unlawful disclosure of inside information, and market manipulation. Obtaining authorization under the regulatory regime will not be easy, and ongoing controls exercised by competent authorities will generate substantial and recurring compliance activity by crypto service providers.
MiCA will be implemented in two stages, with the first 12-month phase-in period focusing on stablecoins and the next 18 months for the remainder of the industry. The regulation will govern the issuance and provision of services related to crypto-assets and stablecoins, but it excludes several components of the digital asset industry, such as non-fungible tokens.
While MiCA explicitly leaves out the white paper requirements of NFTs, the NFT sector will still be influenced by the regulation, as per Yuriy Brisov, Co-founder, and Chief Legal Officer at IOGINALITY NFT Marketplace. The regulation could contribute to increased transparency and trust in the booming world of digital art, collectibles, and more, ultimately elevating the NFT space.