MiCA rules apply in Europe – here’s what you need to know.

Update June 28, 16:40 am UTC: This article has been updated to reflect Bistamp's plans to cancel USDT, not EuroTether.

The first set of new rules under the Markets in Crypto-Assets (MiCA) regulation is set to drastically change the cryptocurrency landscape in the European Union.

The implementation of MiCA is expected to be gradual. The stablecoin rules are expected to go into effect on June 30. In December, laws affecting crypto asset service providers will be introduced.

This legislation is the first on the continent to establish uniform market rules for crypto assets in the European Union and has been expected from regulators since it was first tabled in September 2020.

In April 2023, the European Union Parliament approved the MCA laws, with the goal of bringing a new era of existence to the crypto space, which shows its importance as an industry in the European financial sector.

On June 9, 2023, the MCA was officially published in the Official Journal of the European Union. Now, after one year, the first regulation will be implemented. But what does this mean for cryptocurrency companies, EU member states and users?

To understand the implications of the first MiCA rules, Cointelegraph heard from various industry experts across Europe.

General short-term results

While some degree of government regulation always adds a bit more red tape around a given industry, it also brings a degree of legitimacy. This is especially true for the crypto industry, which has been widely scrutinized for its volatility and speculative nature.

Rennis Zinotish, Executive Director of the Latvian Blockchain Association, spoke to Cointelegraph and said that one of the first effects we will see after the introduction of MCA will be “psychological”.

“There are no more speculations about the legality of crypto trading in the EU. Before, one always heard doubts from various stakeholders: ‘Is crypto trading legal? Is there a future for crypto in highly regulated areas like the EU?'

The EU's top-ranking parliament has said that these doubts are beginning to disappear, saying that crypto-related businesses are legal and that there is a legal framework within which companies can operate.

Jon Egilsson, chairman of Iceland's central bank's supervisory board and co-founder of Monerium, said the MCA provides regulatory transparency but is “disruptive to the market”.

“This is starting with the EMTs. [electronic money tokens] It must now be compliant, and it applies to CASPs as well [crypto-asset service providers]Stablecoins, such as exchanges and wallets, that do not technically comply with the MCA must be delisted as of June 30.

Bye-bye, stable coin

This means that crypto exchanges may cancel certain non-compliant stablecoins or restrict services to users based in the European Union and the European Economic Area (EEA). Many crypto exchanges already operating in the European Union have started to do this.

Cryptocurrency exchanges Uphold, Binance, Kraken and OKX have begun listing stablecoins such as Tether (USDT). Bitstamp plans to list Euro Tether (EURT).

Egilsson said that as demand in European markets increases, it is possible to see that these unruly stablecoin issuers may exit the EU market entirely.

Laura Chaput, head of regulatory compliance at Keyrock, echoed this sentiment:

“Despite these limitations, there is potential for a stable coin market to grow as retail investors gain confidence in the increased regulatory protections.”

Additionally, on June 13, the European Banking Authority (EBA) published several last-minute reports on regulatory technical standards (RTS) related to MMTs under the MiCA. These reports will outline the standards effective from June 30 and should be incorporated accordingly.

Related: Europe's Crypto Industry Can Sleep ‘Better at Night' With New Parliament

The former chairman said that in a short period of time, regulators may need to spend time explaining some of the newly issued regulatory issues as final versions of some of the most critical sections of the regulation, including safeguards, are released.

“From the point of view of market players, it will take some time to respond to those new requirements, so I think the EU Commission will give a transition period of some months and until the end of the year.”

EU crypto businesses

A priority for crypto companies in the EU will be to be aware of regulations and any last-minute changes, as previously mentioned.

Egilson emphasizes that the focus should be on getting the right license. This includes meeting strict organizational, governance and capital requirements, such as adequate and high-quality assets to support their values.

Stable coin issuers indicated:

“So far approved stablecoin issuers and those licensed as e-money institutions (EMIs) will face some new requirements, but it will not be a fundamental change to their operations. Stablecoin issuers previously approved as e-money institutions will have to review some of their practices and safeguards, but nothing major.” .

He added:

“In the medium term, competition is likely to increase, as this creates legal transparency for large institutional players to enter the market.”

Chaput said some businesses may try “regulatory arbitrage” by relocating or trying to use reverse solicitation principles.

On the other hand, she said, this new landscape could “open doors” for established financial institutions to enter the stablecoin market.

Users, this is for you.

As June 30 approaches, EU crypto users may also start questioning their own role in the situation. While access to certain assets will be limited, Chaput said they should be prepared for an ecosystem that changes with “more transparency on how these tokens work.”

“Consumers will benefit from enhanced consumer protection measures, such as guaranteed redemption rights for EMT holders… The increased regulatory oversight aims to provide a safer environment for investors.”

She explained that some users may be exposing themselves to unregulated environments when they are tempted to trade on non-EU exchanges to acquire a wide variety of tokens but with few protections.

In the long term, Egilson said, “we should hope that users will benefit from improved protections and more transparent information about the crypto assets they are acquiring.”

“While there may be some initial discomfort and high barriers for new entrants, we hope that the end result will be a safer and more secure environment for crypto users in the EU and EEA.”

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