This legal panel delved into the European Union’s new legislation, Markets in Crypto Assets Regulation (MiCA). Speakers include Robert Kopitsch, Secretary General of Blockchain for Europe, Justine Scerri Herrera, Partner of MK Fintech Partners, Ernest Lima, Partner of XReg Consulting, Joachim Schewin, Principal Economist at the European Commission, Przemyslaw Kral, CEO of Zonda, and Jonathan Turnham, Partner of Travers Thorp Alberga.
MiCA Comes Down to Individuals and Collectives
To kick off this panel, Joachim Schewin delves into the European Union’s new legislation, MiCA. He explains that the starting point of MiCA is individuals. Everyone has various identities to engage in different collectives, and MiCA exists to empower these bottom-up decentralized initiatives.
“The starting point is never regulation. The starting point is also not crypto. The starting point is how we see the world and how we see individuals and collectives.”Joachim Schewin, Principal Economist at the European Commission
MiCA takes on a bottom-up and liberal approach and it contains three main pillars. First, MiCA is a regulation that excludes regulations on DeFi, DAOs, and NFTs because they don’t see significant risks or they consider the industry too premature to be regulated. Second, MiCA has reversed the proof of burden of utility tokens. National regulators will have to prove a project is against the laws, instead of another way around. The third main element is about setting rules for stablecoins.
Challenges and Unknowns Are Along the Way
Operating in Malta, Justine has a generally positive opinion of the MiCA regulation, such as regulating centralized players and providing fair and transparent rules for trading venues. However, she also recognizes that there may be some confusion and ambiguity in how the regulation will be carried out.
Justine specifically expresses her concerns about the restrictions and market disruptions that MiCA may have on stablecoins. Justine hopes that the bigger players in the stablecoin market, such as USDC and USDT will apply for authorization under MiCA, but she also acknowledges that there are many uncertainties that will need to be addressed as the regulation is implemented.
Ernest hopes that MiCA can serve as a benchmark for other jurisdictions to follow. He argues that the fragmentation of regulations in different countries is making everything difficult and more complicated. He understands that the regulation is catching up worldwide, but it is difficult for it to keep up with the fast-evolving sector and all the different business models and services being offered.
Meanwhile, Jonathan argues that the cryptocurrency industry is complex and diverse, so he sees the need for a base layer foundation for regulation and a global standard that prevents regulatory arbitrage and weak points in jurisdictions. He believes slow and steady progress is necessary to identify pinch points and build a solid foundation.
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Education and Collaboration Are Critically Important
In order for regulations not to impede crypto businesses and innovation, Przemyslaw, Ernest, and Justine all believe that training and education are key to dealing with the challenges and that regulators need to be trained and educated in order to properly regulate the sector.
Joachim thinks it’s important for players in the crypto space not to view regulators as ignorant and unwilling to understand the industry. He shares that the European Commission has launched the European Blockchain Regulatory Sandbox, and will host 20 blockchain startups annually so that the private and public sectors can work together. Collaboration between regulators and the private sector will be necessary to establish sensible regulations that embrace blockchain technology’s potential.
At the end of the day, 10% of the problems that you will ever face with a regulation is the text of a regulation, 90% of your problems will be how people interpret the regulation.Joachim Schewin, Principal Economist at the European Commission
Keep the Hope Up and Build Something Meaningful
Imaging the future, Justine predicts that big players like USDC will wait on the sidelines to see how MiCA plays out before deciding to opt for a license and authorization. Meanwhile, there will also be regulatory arbitrage within certain jurisdictions.
Facing these uncertainties, Przemyslaw and Ernest both encourage builders to understand the regulations and don’t give up. Jonathan advises crypto builders to keep trying even though it means sitting down and talking to the regulators countless times or even bringing the governments to court. He believes that regulations are coming, and we can either be a part of it or sit on the sidelines and cry.
The point is don’t get discouraged. Keep trying. If you sit on the sidelines and just complain about it, the stuff is going to come in without your input, and that’s going to be even shittier than what it is now, so keep the fight going!Jonathan Turnham, Partner of Travers Thorp Alberga
Ernest thinks it’s essential for industry players to examine their products and services and do a good jurisdictional analysis. Agreeing with him, Joachim advises builders to think about the target audience and what they want to achieve for society. Focus on explaining the benefits of the use cases to gain attention and support from regulators and policymakers.