Draft MiCA EU Crypto Asset regulation
Comments from 2Tokens ecosystem
Last week, the European Commission published proposed regulations for Crypto assets in the European Economic Area. The proposed regulation, known as the Markets in Crypto-Asset Regulation (MiCA), is part of a wide range of policy work aimed at putting Europe at the forefront of blockchain innovation and adoption. MiCA aims to create legal certainty, support innovation, increase consumer and investor protection, ensure financial stability and support innovation within a broad definition of the crypto asset market, crypto asset providers and crypto asset services.
The 2Tokens foundation supports strategies that enable the growth of distributed technology (DLT) for the benefit of society. It is 2Tokens' mission to clarify the regulatory route of tokens and token financing by means of a roadmap. We believe that creating regulatory clarity and legal certainty is essential for the digital economy. Without a clear understanding of laws and regulations, 2Tokens believes it will be difficult for the industry to achieve its goals of high growth and broad geographic adoption.
The MiCA documents are detailed, comprehensive and broad in its coverage. The proposed regulation leaves little or no parts of the market untouched. It allows very few exceptions and is intended to be very prescriptive and guiding for both industry participants and Member States. Additionally, because the MiCA regulation is both far-reaching and exceptionally detailed, it urgently requires all market participants to invest significant time to understand the regulatory environment and the ways it interacts with other related Member States and EU laws and regulations.
2Tokens expects this to cause significant market disruption as companies, institutions and regulators across countries will struggle to first understand, then process and operationalize this comprehensive, intertwined set of regulatory and compliance proposals. 2Tokens has shown in the past year that in the Dutch situation a lot is possible within the existing legislation and regulations. The 2Tokens research team is working on an interactive roadmap that supports companies and institutions in the choices that have to be made with regard to token financing. The first version of this roadmap will go live in October.
In an initial evaluation of the proposed regulation, 2Tokens has gathered reflections and opinions of our members who are actively involved in the different 2Tokens use cases. Creating clarity and legal certainty about regulations is generally regarded as a positive step forward. The majority of 2Tokens members endorse the core objectives of the regulation and welcome a harmonized approach that promotes fair competition and the opening of a large and attractive market for innovative decentralized ledger technology.
While the proposed regulation is well designed, some members are concerned that it, in its current form, could overburden a young and innovative industry with costly and complex compliance and legal requirements disproportionate to the policy objectives it pursues. They hope that further detailed evaluations will provide a supportive series of improvements and refinements to ensure that the MiCA regulation does not stifle innovation within the European Union.
In some cases, there are questions as to whether the proposed Regulation complies with the principle of technical neutrality and a level playing field, both of which are objectives of the Regulation. In particular, unauthorized blockchain platforms, where the level of technological innovation has arguably been most productive, appear to be absent from the proposed regulation. The proposed regulation appears to favor credit institutions, investment firms and payment institutions over Crypto Asset Service Providers (CASP), according to some members. For example, these members call for clarification on the process whereby CASPs may need to migrate from existing national frameworks and apply for new licenses, while other market participants may be exempt from the same requirements.
Certain analyses suggest that new and emerging developing markets such as Decentralized Finance (DeFi) would likely no longer be accessible to Europe and its citizens under the proposed regulation. Europe's ability to attract talent, stimulate innovation, sustain an ecosystem for start-ups and develop competitive advantages for the enjoyment of EU Member States and citizens could seriously suffer as a result. Likewise, other emerging technologies, innovations, applications and functionalities that could improve the lives of European citizens and contribute to the promotion of democratic digital governance initiatives could be made inaccessible to European citizens and Member States.
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