How European Crypto Firms Are Getting Ready for Sweeping Legislation


The European Union’s sweeping Marketplace for Crypto Assets (MiCA) legislation is slowly moving towards becoming law, and local crypto firms are bracing for the change. The new regulations, which will be the law for all 27 EU member countries, apply stricter rules than now they are in place in some European countries.

In addition to very detailed rules and limitations for stablecoin issuers, which CoinDesk has been deck thoroughly, Mica demands an unprecedented level of transparency from crypto exchanges.

This story is part of CoinDesk Policy Week.

Under the legislation, crypto firms must not only keep the public informed about their pricing process and trading volumes in real time, but must also settle all transactions on the same day they are made. Exchanges must keep their own funds, including cryptocurrency, separate from funds belonging to their clients. The regulation also explicitly prohibits the use of inside information.

Most importantly, MiCA introduces a universal licensing approach for all EU member states, making it the most comprehensive legislation of its kind anywhere in the world.

Also read: Europe’s MiCA cryptographic rules are coming soon. Here’s why they’re important

Frédéric Montagnon, founder of French blockchain company Arianee, told CoinDesk that MiCA licensing and other rules are “more complex, more sophisticated” than those currently set by the French regulator, adding: “During the MICA process They took a lot of what was done in France and made it deeper.”

At the moment, the license is only required in France for those cryptocurrency companies that provide some form of cryptocurrency custody, which means that they store user funds in their own accounts. For those who do not provide escrow services, the license is optional. MiCA, which as an EU-wide directive must be enacted at the level of the member states, will be mandatory for all.

Banking and insurance for crypto

At the first site, things won’t change much for him. 60 companies They have already registered with the French Financial Markets Authority (AMF) and “have already adapted their processes to what the French regulator told them to do,” Montagnon said. “There is nothing in MiCA that is impossible for a startup to achieve.”

There will be one major change, however: if the final version of MiCA forces cryptocurrency service providers to insure their businesses, it will be a headache for startups in France, Montagnon said.

“It’s hard to find someone to secure client funds, especially in crypto, especially after the FTX crash,” Montagnon said. French banks have been hostile to crypto companies because they also find it almost impossible to get an audit by a reputable company. Some local household names among banks work with select crypto companies (Montagnon doesn’t say which banks), but for most companies it’s almost impossible to get a bank account.

“The real challenge is finding a bank and insurance. And that’s really disappointing. You pass all the steps, you have your license and the market keeps saying no. I would like to imagine that with MiCA that will change,” Montagnon said, but he is pessimistic of that happening.

In Germany, says Sven Wagenknecht, editor-in-chief of crypto news website BTC-ECHO, getting a bank account is also a hassle for crypto startups.

“In Germany, most of the banks are against cryptocurrencies,” he told CoinDesk. Smaller banks like N26 and Solaris, for example, are more industry-friendly, but bigger ones like Deutsche Bank still steer clear of cryptocurrencies. He believes this may change once pan-European regulation is in place: “Banks need some clarity in regulation, and MiCA is a step forward.”

There is another part of MiCA that can bring European banks and cryptocurrencies closer together, at least in Germany, Wagenknecht said: MiCA will make applying for a cryptocurrency custody license an easier and more transparent process than current German regulation offers.

This will give the green light to German banks that are interested in providing crypto custody themselves, such as Sparkasse, which has reportedly been labor in a cryptocurrency exchange service, and Hauck & Aufhäuser, which acquired a Kapilendo licensed crypto custodian in 2019.

Securing a crypto custodian license in Germany right now is a very demanding process, Wagenknecht said, and only a few companies currently hold one. “You have to wait a long time and you don’t know what you’re doing wrong, it’s not a very transparent process and it’s very difficult for a company without a lot of funds,” he said.

John Ehlers, COO of Luxembourg-based cryptocurrency exchange Bitstamp, believes that cryptocurrency companies will feel more comfortable with MiCA.

Licenses for virtual asset providers under MiCA, unlike some of the current lighter registration regimes in Europe (for example, in France), require detailed disclosures: “The MiCA license is a real license, a prudential license. They watch how you run your business. It’s very deep,” Ehlers said.

That level of transparency will likely give some peace of mind to banks and other traditional businesses that have not been comfortable with cryptocurrencies until now, Ehlers said. “You are not on an equal footing with the credit institutions, but you are at the table with them.”

time to get ready

However, the gap between what a crypto service is doing now to comply with regional laws and what it will need to do under MiCA can be quite wide, so companies need to start preparing now, Ehlers said.

“It is always more complicated and takes more time than you think. My advice to the industry is that you should start now, get ready for the MiCA app. What is your company doing today and what does MiCA require?” Ehlers said.

On the user side, the onboarding process could be a bit longer for cryptocurrency exchange clients, Ehlers said. Exchanges will need to determine how suitable a user is for certain types of products. At the same time, users will be entitled to more information about assets listed on exchanges so they can make more informed decisions while trading.

After MiCA passes, cryptocurrency companies will have 18 months to adapt. It’s hard to know when exactly the regulation will become law because the vote has already been postponed twice, most recently. pushed to april

In the long run, MiCA will make life easier for European crypto services, Wagenknecht said, with a more consistent approach towards regulation. But at first there might be some problems in harmonizing existing national regulations with MiCA. An example is Germany blockchain securities lawwhich is different from the MiCA approach.

Some experts are already saying that MiCA is not comprehensive enough and that the world’s regulators need to go further. For example, a research group commissioned by the French government I call special attention to the metaverse, especially user data protection regulations, in October. The current text of MiCA does not contain any mention of the metaverse.

There is also concern that as deeply as Europe is regulating cryptocurrencies, it won’t really work until other parts of the world follow suit.

“It makes no sense for Europe to be alone, because this is a global development and we cannot put barriers to it”, European Commissioner Mairead McGuinness saying Coin Desk.

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