MiCA: Europe’s Game-Changing Crypto Regulation Explained

In the Brief:

  • The European Parliament passed the Markets in Crypto-Assets Act (MiCA), creating the world's first comprehensive crypto framework.
  • MiCA will establish guidelines for digital-asset issuers' operation, structure, and governance.

3 - 5 minute read

The European Parliament’s recent passing of the Markets in Crypto-Assets Act (MiCA) marks a significant milestone in the regulation of digital assets. MiCA aims to establish guidelines for digital-asset issuers’ operation, structure, and governance, making it the world’s first comprehensive crypto framework. Though the regulation still requires approval from the European Council, it is expected to become a reality by 2024 or 2025.

Despite its flaws, the crypto community welcomed the news, with Binance CEO Changpeng Zhao pledging his readiness to comply with the regulation, while Gemini co-founder Tyler Winklevoss noted the lack of similar legislation in the United States. Patrick Hansen, director of EU strategy and policy at stablecoin issuer Circle, said that MiCA will enable European crypto firms to scale and grow faster, allowing licensed companies to offer their services throughout the world’s largest single market, representing roughly 450 million people.

MiCA’s potential impact extends beyond Europe, as Ukraine’s parliamentary Tax Committee’s deputy chairman, Yaroslav Zheleznyak, revealed that his colleagues were already working on implementing some provisions from MiCA nationally. It remains to be seen whether the United States will take a cue from MiCA or continue regulating through enforcement.

In the United States, Securities and Exchange Commission (SEC) Chair Gary Gensler faces pressure from Representative Warren Davidson, who announced his intention to remove Gensler from his role after the SEC’s latest announcement that it would revisit a proposed redefinition of an “exchange.” The SEC chair is under heavy pressure, with Representative Patrick McHenry publicly demanding that he provide “clear rules of the road” for crypto.

Meanwhile, the SEC charged crypto-asset trading platform Bittrex and its co-founder and former CEO William Shihara with operating an unregistered national securities exchange, broker, and clearing agency. The commission argues that six tokens traded on Bittrex, including OMG, Dash, Algorand, Monolith, Naga, and IHT Real Estate Protocol, are securities. The complaint seeks disgorgement, penalties, and permanent injunctions against the defendants in a jury trial.

In Hong Kong, a court ruling involving defunct crypto exchange Gatecoin acknowledged cryptocurrencies as property that can be held in trust. The court deemed it appropriate to follow reasoning applied by other jurisdictions that crypto was property and could form the subject matter of a trust. The ruling could give insolvency practitioners in Hong Kong greater clarity around digital assets, aligning Hong Kong with other jurisdictions.

The Bottom Line

The passing of MiCA by the European Parliament marks a significant step towards comprehensive crypto regulation, though the regulation still requires approval from the European Council. MiCA’s potential impact extends beyond Europe, as Ukraine has already promised to adopt MiCA nationally. In contrast, the United States may continue regulating through enforcement, with SEC Chair Gary Gensler under pressure to provide clear rules of the road for crypto. The recent SEC charges against Bittrex and its co-founder and former CEO William Shihara highlight the ongoing regulatory actions against the crypto industry in the United States. In Hong Kong, a court ruling acknowledged cryptocurrencies as property that can be held in trust, giving insolvency practitioners greater clarity around digital assets.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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