BRUSSELS, BE – European crypto businesses anticipate the effects of MiCA (Markets in Crypto Assets) regulation should it pass a vote in the European Parliament on April 19. After numerous fraud and money laundering cases in 2022, many countries want to regulate the crypto industry, and the EU is at the forefront of that effort with MiCA.

What is MiCA? 

Markets in Crypto Assets (MiCA) is a broad regulatory framework proposed by European Union lawmakers that details a comprehensive set of rules for cryptocurrency businesses operating in the EU. MiCA will regulate wallet providers and crypto exchanges to protect consumers. It will also require that stablecoins maintain reserve minimums and that the reserves be transparent.

MiCA also requires crypto providers to issue token holders a claim on their tokens that can be redeemed at fiat currency value at any moment. When a customer sells a token, the provider must issue payment in the same fiat currency with which the token was bought to avoid risks of cross-currency trading. 

The effects of MiCA

A formal debate has been scheduled for April 18, with a vote taking place the following day. If implemented, MiCA will have several effects on crypto businesses in Europe.

1. Increased regulation

MiCA would introduce a new level of regulation for Europe’s cryptocurrency businesses, which has been seen as both a positive and a negative. It will provide businesses and entrepreneurs with a clear framework for businesses to operate in the EU, potentially boosting investor confidence while reducing the risk of fraud and market manipulation. 

On the other hand, increased regulation may also make it harder for new and smaller businesses to enter the market. More regulations will raise compliance costs for businesses requiring new technologies, personnel, and processes to meet regulatory requirements. Smaller businesses with less capital may not be able to compete.

2. Licensing requirement

Under MiCA, crypto businesses must be licensed by a state regulator. To obtain a license, a business must meet certain standards, including ensuring the security of customer assets and compliance with anti-money laundering (AML) and not engaging in terrorist funding. 

3. Restrictions

MiCA would also introduce restrictions on certain cryptocurrency activities, such as banning anonymous transactions and limiting the sales of a particular digital asset. Restrictions will be the most impactful of MiCA’s effects on crypto enterprises as they will dictate how a company’s business model is structured. Businesses that rely on certain aspects of AML or do business with nations deemed to be terroristic could be shuttered.

4. Greater clarity

One of the benefits of MiCA would be the increased clarity on the legal status of cryptocurrencies for the businesses operating in this space. This could reduce uncertainty and promote the adoption of crypto in Europe.

5. Uncertainty

While the intentions of MiCA are meant to provide greater clarity for companies and protect customers, there is still a lot of uncertainty among founders about how the regulations will be enforced. This uncertainty can potentially cause a chilling effect in the marketplace, limiting investment and growth for crypto businesses.

The road to implementation

Overall, the impact of MiCA on cryptocurrency businesses depends on a wide range of factors, most notably the types and sizes of businesses affected by its framework. If the law passes on April 19, the European Parliament will roll out enforcement gradually over the next three years, giving businesses time to comply.

While there is no doubt that some businesses will struggle to adapt to the new ecosystem, others may see it as an opportunity to gain a competitive advantage. The bottom line is that, like any other business, commitment to the customer and compliance with the law will make all the difference in whether a business succeeds or fails.