The MiCA (Markets in Crypto-Assets) regulation is expected to receive final approval from the European Parliament soon, after two and a half years since it was proposed.
The new cryptocurrency regulation known as MiCa (Markets in Crypto-Assets) is anticipated to receive final approval from the European Parliament in the upcoming weeks, or by the end of April. It has been two and a half years since the European Commission originally proposed the MiCA rule, which was in September 2020.
The final text appears ready for Parliament’s approval. Once accepted, the compliance responsibility won’t start until 18 months after entry into force, which suggests late 2024.
In June 2022, the Council and European Parliament gained tentative agreement, but ratification has been postponed. Some topics remain unanswered, including NFTs.
The NFTs controversy
The final MiCA regulation classifies cryptoassets as e-money tokens, utility tokens, and asset-referenced tokens. Bitcoin and Ethereum are payment tokens, but NFTs are harder. It is yet unclear whether this collection of digital assets should be covered by the new rule.
They are not fungible, hence they cannot possibly be payment tokens. Apart from a few rare instances, they are not also thought of as utility tokens, nor are they, by themselves, tokens that represent other assets like stablecoins.
So, they should be addressed separately or categorized.
The legislature may require non-fungible tokens to conform with the new standards even though they are not explicitly covered by the MiCA.
The final draft, expected to be approved in April, does not feature an NFT category. The new regulation must apply to NFTs if upheld in court.
The draft might contain a section on NFTs or expand the asset-referenced token section to include NFTs that aren’t certificates.
It’s surprising that a comprehensive crypto-asset legislation doesn’t include non-fungible tokens, which are currently common on many blockchains.
The use of MiCA in the cryptocurrency market
The real application of the MiCA regulation must wait until at least the second half of next year, as was already mentioned. By then, all EU residents who issue, trade, or provide bitcoin services must comply with this rule.
The legislation applies to “services linked” to cryptocurrencies, which theoretically includes any activities in the cryptocurrency sector, making its exact scope unclear.
Without a clear boundary, the regulation would cover all cryptocurrency commercial services.
For instance, even though they do not function as middlemen, would software companies that design non-custodial wallets be required to abide by the MiCA regulation? Operators of the DeFi protocol would be required to abide with the new rule, right?
Does it apply to decentralized services, where no centralized body manages them, or merely to centralized corporations that do?
Because decentralized services are hard to regulate, the latter is the most popular opinion. Since the restrictions relate to individuals, crypto project leaders may still have to observe them.
Although authorities have long monitored centralized virtual currency providers, such as through required registration, they must follow MiCA legislation.
Actually, this group includes centralized exchanges and all middlemen who keep third-party coins.
Protests against the updated regulatory environment
Over the course of the EU’s new MiCA law’s development, many cryptocurrency industry players have opposed.
From the start, the planned regulations were seen as uninnovative and harsh.
Crypto businesses worry that the MiCA law will raise their costs, forcing them to pass them on to customers. It also looks to be a token adaptation of the crypto market to the established one, regressing and missing an opportunity to evolve.
The EU is already unfriendly to cryptocurrency operators, but the new legislation may make it considerably worse.
Switzerland, one of the world’s largest crypto centers, is in Europe, even if it’s not part of the EU, and has long adapted to these new technologies. There is a chance that MiCA will ultimately further advantage Switzerland at the expense of EU nations.
The Middle East borders Europe, as do Dubai and the UAE, which are competing with Europe for crypto dominance. Hence, from this perspective, the EU will not only suffer from competition from Switzerland on the continent of Europe, but also from UAE competition on the outside.