The European Commission's proposed new Regulation on Crypto-Asset Markets (MiCA) is currently going through its first readings in the European Parliament and the Council. As part of the EU's upcoming digital finance strategy, these new rules will surely have an impact on the direction of the crypto-asset market in the EU in the years to come.
The decentralized aspect offered by the blockchain technology that underlies crypto-currencies, ensures that no one person or entity can control or compromise these tools. This characteristic also implies, however, that investors in crypto-currencies are unable to turn to the authorities in the event of fraud, attack or accidental loss of funds. It is this problem that European regulation seeks to offer a solution to, by subjecting crypto-exchanges to user protections and transparency and governance standards.
Through MiCA, the EU seeks to be at the forefront of the general adoption of blockchain by providing legal certainty for assets not yet covered by current legislation, establishing rules for providers and issuers of these services, and ultimately defining the framework for stablecoins.
The directive aims to classify assets provided through blockchain networks. The taxonomy would distinguish between
Utility tokens: which give their holder access to a specific product or service (ICO, NFT)
Reference tokens: which represent the value of another currency in order to maintain a stable value (Stablecoins)
Electronic money: tokens whose purpose is to be used as a medium of exchange (Bitcoin,ETH....)
Beyond this classification, the directive establishes transparency and information requirements for crypto asset providers, both in terms of their issuance and their operation and governance. It also introduces regulations for the offering and marketing of crypto-currencies to the general public. And finally, it establishes a procedure for controlling the authorization of the issuance of asset reference tokens.
It is important to note, nonetheless, that the current version of the directive has been the subject of much discussion and controversy.In particular, the regulation seeks to prohibit the issuance of interest on electronic money tokens without seeming to provide a clear explanation of the motivations for such a decision, which for many would represent an infringement against financial autonomy. This ban would prevent European citizens from investing in attractive options (Stablecoins can earn over 10% annual interest compared to 1% on average for ISAs in the UK, for which consumers will have to lock in their funds for five years) at a time when the financial stimuli put in place to revive the post-blockage economy are expected to create high inflation.
In conclusion, Europe has decided to truly recognize the new opportunities that crypto-currencies represent and decide that it is time to properly regulate the industry. User protection is at the heart of the discussions, but controversial bans will surely be debated as well.