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The Arrival of MiCA

Author: Syedur Rahman  24 June 2024
2 min read

Syed Rahman considers the possible impact of the European Union’s crypto legislation.

After what seems like a long wait, MiCA is finally set to make its presence felt.

The European Union’s (EU’s) Markets in Crypto-assets regulation is the bloc’s attempt to make the crypto sector a safer place, free from scams and market volatility. While it entered into force on 29 June 2023, it only becomes applicable in part (regarding asset-referenced tokens and e-money tokens) from 30 June 2024, with other parts applying from 30 December 2024.

It ushers in a regime that will enable exchanges and wallet providers to apply for a licence to operate across the bloc.  Which is why the EU has been happy to lay claim to being the first global jurisdiction to set down specific rules for the cryptocurrency world.

Yet not everyone has been viewing the arrival of MiCA as a cause for celebration. There has been no shortage of European politicians citing MiCA as a means of starting a new era – one in which the misuse of crypto will be tackled, innovation will be championed, a clear framework will be set out and the EU will be at the forefront of all things crypto. But the counter-argument made by many is that users of cryptocurrency have been happy to see it free from government control. While at least some of those who take that view may acknowledge the need for some degree of regulation – in order to ensure crypto’s long-term credibility – there is a wariness of what happens next.

Many crypto companies are yet to explain to their customers exactly how MiCA will affect them. It should be noted that early June saw Binance announce that it would be restricting access to unauthorised crypto coins once MiCA takes effect. Others, however, have not been so clear about if or how MiCA will affect their day-to-day functioning.

Among the first parts of MiCA to take effect are those relating to stablecoins. These are arguably the toughest aspects of the new regulation, and yet there appears to be a lack of clarity and / or understanding about them. When it is considered that the European Banking Authority (EBA) only published its final set of technical standards a week ago, complaints that operators have had little opportunity to make the necessary preparations seem justified.

Against this backdrop, there appears to be little clear-cut evidence of any of the sizeable crypto operators having been approved under MiCA, despite anecdotal evidence of licences having been applied for. There has also been feelings voiced that MiCA is not proportionate, meaning that the “little guys’’ starting up face the same challenges as the biggest, most established operators when it comes to securing official approval.

This is a situation that is likely to attract continued criticism, given that the recent high-profile controversies in the crypto world have mostly involved the “big guys’’. With the jailing of Sam Bankman-Fried for fraud and conspiracy to commit money laundering after FTX’s spectacular fall from grace being followed by the recent imprisonment of Binance founder Changpeng Zhao for money laundering, crypto’s reputation is in need of bolstering.

While there has always been the demand for regulation of crypto – at least from some - it still remains to be seen if MiCA will satisfy that demand.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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