MiCA: The new European law that will regulate the cryptoassets market
The European Union has taken an important step in the regulation of cryptoassets with the approval of the Markets in Cryptoassets Regulation (MiCA). This world-first law aims to establish a clear and harmonised legal framework for the issuance, offering, trading and provision of services related to cryptoassets across the European Union.
What is MiCA and why is it important?
MiCA is a regulation that seeks to protect investors, ensure financial stability and encourage innovation in the cryptoasset market. The law sets out requirements for cryptoasset issuers, service providers and trading platforms to ensure transparency, security and market integrity.
What key aspects does MiCA regulate?
Types of cryptoassets: MiCA defines and classifies different types of cryptoassets, including e-money tokens, asset-referenced tokens and other cryptoassets.
Requirements for issuers: Issuers of cryptoassets will have to comply with capital, transparency and corporate governance requirements, as well as obtain authorisation from national regulators.
Service providers: Cryptoasset service providers, such as exchanges and custodians, will need to obtain a licence and comply with conduct and customer protection standards.
Trading platforms: Cryptoasset trading platforms will have to comply with transparency and security requirements, as well as ensure investor protection.
When will MiCA enter into force?
MiCA has already entered into force on 1 January 2025, after a transition period for market players to adapt to the new regulation, which is 6 months longer.
What are the benefits of MiCA?
Increased security for investors: MiCA puts in place measures to protect investors from fraud, manipulation and other risks associated with cryptoassets.
Greater legal clarity: MiCA provides a clear and harmonised legal framework for the cryptoassets market, making it easier for businesses to operate and reducing legal uncertainty.
Encouraging innovation: MiCA encourages innovation in the cryptoasset market by establishing clear and proportionate rules that enable the development of new technologies and services.
What are the implications of MiCA for the cryptoasset market?
MiCA is expected to have a significant impact on the cryptoasset market by establishing a robust regulatory framework that promotes trust and confidence. The law could also boost cryptoasset adoption by facilitating access for institutional investors and traditional businesses.
How does MiCA affect USDT?
USDT, the world’s most widely used stablecoin, will be directly affected by MiCA. European regulations classify stablecoins as electronic money tokens (EMTs), which implies stricter regulatory requirements for stablecoin issuers.
Implications for USDT
Capital and reserve requirements: Tether, the issuer of USDT, will have to meet capital requirements and maintain adequate reserves to support the value of the stablecoin.
Transparency and auditing: Issuers of stablecoins are expected to be transparent about their reserves and undergo regular audits to ensure the stability and backing of their stablecoins.
Restrictions on issuance and distribution: MiCA may impose restrictions on the issuance and distribution of stablecoins that do not comply with regulatory requirements.
Regulatory oversight: Issuers of stablecoins will be subject to oversight by European regulatory authorities, which could entail additional costs and compliance requirements.
Why might USDT be delisted from major exchanges?
Compliance with MiCA’s strict provisions has proved impossible for USDT, a stablecoin that does not meet the issuance requirements set by European regulations, affecting its market presence
In conclusion
MiCA represents an important milestone in the regulation of cryptoassets globally. This pioneering law will lay the foundations for a safer, more transparent and efficient market that encourages innovation and protects investors.
The entry into force of MiCA in 2024 represents a challenge for USDT. If Tether does not adapt to regulatory requirements, the stablecoin could be excluded from major European exchanges, which would have a significant impact on its liquidity and adoption in the region – in fact, this is already happening.
Disclaimer: The information set forth herein should not be taken as financial advice or investment recommendation. All investments and trading involve risk and it is the responsibility of each individual to do his or her due diligence before making a decision.
