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MiCA Regulation Faces Criticism for Hindering EU Crypto Competitiveness

Highlights:

  • Ledger’s Seth Hertlein criticizes MiCA’s complexity and cost, arguing it will stifle EU crypto startups’ competitiveness.
  • Robinhood’s Bitstamp acquisition is seen as a response to MiCA, highlighting concerns over the impact of the regulation.
  • Despite criticisms, MiCA has been praised for providing regulatory clarity, and the rules are set to become effective by June 30, 2024.

Seth Hertlein, Global Head of Policy at Ledger, has issued a stark warning about the potential impact of the European Union’s impending Markets in Crypto Assets (MiCA) legislation on the region’s crypto industry. He argues that the regulation’s complexity, cost, and restrictive nature could severely undermine the competitiveness of small crypto businesses within the EU.

Hertlein believes that Robinhood’s recent acquisition of the crypto exchange Bitstamp is a direct consequence of the impending MiCA legislation. He suggests this move highlights European firms’ challenges under the new regulatory environment. While some in the crypto community view the acquisition as a sign of industry growth, Hertlein sees it as a response to the regulatory burdens posed by MiCA.

MiCA’s Impact on EU Crypto Firms

According to Hertlein, MiCA was intended to ensure Europe remained competitive in the Web3 space, unlike its performance in Web2. However, he argues that the regulation and other EU laws will have the opposite effect. “MiCA was heralded by the EU institutions (and much of the crypto industry) as ensuring that Europe ‘wouldn’t lose Web3 the way it lost Web2.’ Except, MiCA (together with the constellation of regulations the EU continues to erect around it) guarantees just the opposite,” Hertlein stated.

Due to its demanding requirements, Hertlein explains that the MiCA legislation could drive away European crypto businesses. He argued that the regulation’s cost and complexity would make it difficult for small firms and startups to survive. “Bitstamp’s purchase by Robinhood is evidence that the MiCA effect began even before MiCA fully came into force… When it comes to global competitiveness, overregulating is the surest way to lose, and no one is better at it than the EU,” he added.

Challenges and Opportunities

Hertlein noted that the situation could have been different with a focus on enhancing EU competitiveness. He emphasized the importance of including more input from technical experts. He believes that emerging markets such as APAC, LATAM, and Africa are better positioned to realize the potential of crypto due to lower regulatory burdens. “Through crypto, APAC, LATAM, and Africa have an opportunity to leapfrog the legacy markets that are so intent on using state power to protect the status quo,” Hertlein added.

Despite Hertlein’s concerns, MiCA has received broad support from the crypto industry to provide much-needed regulatory clarity. The EU passed the regulation into law in June 2023, and it will become effective by June 30, 2024. Industry stakeholders see it as an example of the regulatory certainty lacking in other regions, such as the United States.

Preparations for MiCA Implementation

Specific rules for stablecoin issuers will take effect by the end of June. Regulators and crypto-focused businesses are preparing for these changes. For instance, Binance has announced restrictions on unauthorized stablecoins for users within the European Economic Area (EEA), effective June 30. Similarly, in March, OKX discontinued support for USDT trading pairs within the EEA.

Regulators are also preparing to implement the new rules, with each EU member state likely to have a different grace period. By December 2024, additional regulations, including licensing requirements for crypto-asset service providers (CASPs), will also become effective. Most countries have already designated authorities to enforce these rules.

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Disclaimer: Cryptocurrency is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.

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