One of the biggest challenges of operating in the space of crypto payments is navigating the complex web of regulations. That's why the recent confirmation of the Markets in Crypto-Assets (MiCA) regulation is such a significant development for the crypto and payment communities.
The MiCA regulation is a comprehensive set of rules that will bring clarity and regulation to the world of cryptocurrencies in the European Union (EU). It is set to revolutionize the cryptocurrency industry, providing legal clarity and investor protection for digital assets, including stablecoins and utility tokens.
The new regulation mandates strict compliance rules around disclosure, governance, and business conduct, promoting market integrity and investor security.
27 member states, 27 different approaches
MiCA is the largest and most significant crypto-related legislation to come out of a major jurisdiction, promising to reshape the industry for years to come.
Until now, only the AML directive has covered the legislative framework of cryptocurrencies in the European Union. While this directive has been implemented by each member country, there is no unified approach to crypto regulation. Some member countries established their own regulatory framework (Malta, France, Estonia, etc.) or particularly interpreted their current framework (Germany). As a result, one can argue there are currently 27 different regulatory systems for cryptocurrencies across the EU, which can make it difficult for companies offering crypto services to operate in a compliant manner across multiple countries. Compliance requirements may vary significantly from one country to another, which creates additional complexity and uncertainty for businesses in the industry.
GoCrypto as a global payment service provider
As a company, we hold a unique position within the cryptocurrency industry. Our offerings include the ability to settle payments in fiat currency on our own, which requires us to comply with regulations and laws that are applicable to traditional payment providers. This puts us in a somewhat more challenging position than other crypto companies that solely deal in digital assets.
Since our company's inception, we have proactively engaged with regulators and authorities every time we enter a new market. However, we have encountered significant challenges due to the lack of regulatory clarity and consistency across different member states. Over the years, we have received different answers to the same questions in individual member states. For instance, some states have mandated that we must comply solely with anti-money laundering regulations, while others have considered our services to be akin to payment-providing services and insisted that we obtain payment institution or e-money licenses under the PSD2 or EMD2 directive respectively. This inconsistency in the interpretation and implementation of regulations has made it challenging for us to navigate compliance requirements across different EU member states.
However, we believe that the introduction of MiCA regulation will ultimately benefit our company, at least in the short term. It will provide a more level playing field for all industry players and ensure a more standardized approach to regulation across the EU. This will not only increase our credibility but also help us to navigate compliance requirements more efficiently, both domestically and abroad. Being able to demonstrate that we are registered and licensed in our own country will undoubtedly bolster our reputation and give us a competitive edge in the global marketplace.
Other interesting aspects of the MiCA regulation
- Whitepapers and civil liability:
MiCA is set to have a significant impact on initial coin offerings (ICOs), as companies will be required to adhere to stricter regulations. One key aspect of MiCA is that issuers will be required to provide a detailed whitepaper that includes specified information. However, what's even more important is that the company and management team will be held civilly liable for the contents of the relevant white paper toward the holders of its tokens. This represents a major change from the current environment, where ICOs are often conducted with little oversight or accountability.
The introduction of civil liability for whitepapers is expected to raise the bar for companies seeking to conduct ICOs, as they will need to ensure that the information provided is accurate, truthful, and not misleading. While this may make it more challenging for some companies to meet the new regulatory requirements, it will also increase transparency and accountability in the industry, which should ultimately benefit both issuers and investors.
- Crypto license included in existing banking licenses
MiCA introduces a key change to the regulatory framework, as it allows all credit institutions in the EU, including banks, to issue crypto assets in the scope of their existing banking license. This will streamline the process for banks seeking to enter the crypto market and enable them to offer a broader range of crypto-related services to their customers. As a result, this move is expected to increase competition, promote innovation, and drive growth within the industry.
- The impact of compliance costs
Although the introduction of MiCA regulation is expected to reduce the number of bad actors in the industry, it may also have negative consequences for smaller companies. The increased compliance costs associated with these regulations may make it difficult for these companies to stay afloat, let alone innovate. This could lead to a situation where only larger, financially stable companies are able to compete, reducing the overall diversity and creativity of the industry. While the elimination of bad actors is a positive development, the potential impact on smaller companies is a concern and should be taken into account when considering the overall impact of the regulations.
The Brussels effect
The upcoming MiCA regulation promises to be a significant milestone in the development of the crypto industry in Europe. Its potential impact may extend beyond Europe, as it may set a new global standard for crypto regulation, much like the General Data Protection Regulation (GDPR) did for data privacy. As we move towards a more regulated and transparent crypto industry, a clearer regulatory framework will be essential for companies to innovate and grow, and for consumers to have confidence in the market. We welcome the introduction of MiCA as a step in the right direction toward building a more sustainable and trustworthy crypto ecosystem.
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