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- 1 MiCA regulations will clarify the regulatory framework regarding multiple aspects of crypto assets.
- 2 The regulations should come into effect between mid-2024 and early 2025.
The European Union will become the first major jurisdiction to have a harmonized regulatory framework regarding crypto assets with the Market in Crypto Asset (MiCA) Regulation. The European Parliament is ratifying MiCA, being the pioneer regulation it will seriously impact the crypto industry.
MiCA & Its Impact on The Crypto Industry
After the significant events of 2022, like the Terra Ecosystem collapse, FTX saga, 3AC, etc., Many events in the past caused investors to lose funds, hacks, and other destructive activities called for clear regulatory guidelines for the crypto industry. Heading to these calls, the European Union introduced MiCA regulations in September 2020 to provide a harmonized regulatory framework across the EU regarding crypto assets.
MiCA covers a broad array of issues, including issuance and trading of crypto assets, crypto asset service providers (CASPs) in the industry, and, most importantly, investor protection. It was noted that there was a dire need for regulatory clarity in instilling confidence among investors for increasing the adoption percentage.
As cleared by a tweet, these rules have already started showing results in the bloc. This highlights that Venture Capital (VC) investments raised by 5.9% in Q1 2022 were up almost tenfold, with a jump of 47.6% in Q1 2023.
It shall be noted that the EU has around 450 Million consumers of crypto assets, and the clarity provided by the MiCA puts the bloc on the path of becoming the next hub for crypto projects. Increased activity of the developers should result in an increase in exciting projects and protocols, which in turn boost the adoption.
517 European Lawmakers voted in favor of the MiCA, while 38 voted against it. This means that the regulations passed the first hurdle with increased support from the parliament. The bill is going through the parliamentary procedure and shall come into effect between mid-2024 and early 2025.
Before the introduction of MiCA, the crypto industry was marred by a need for more clarity in regulatory guidelines for crypto assets in Europe. It was causing situations where investors were hanging in the balance regarding the expected level of protection while investing in crypto assets.
The proposed regulation addresses this conundrum by providing a systematized regulatory framework, which would give the much-required clarity in rules and standards for issuing and trading crypto assets. It would also give a distinction between cryptocurrencies and tokens.
The regulations require all CASPs, such as exchanges, wallet providers, and related services, to obtain a license from the national regulator to operate in the EU. MiCA would also introduce new requirements for crypto asset issuers. They must now provide investors with a detailed disclosure regarding all the details and risks associated with investing in the issued asset.
Another essential aspect MiCA will address is introducing the stablecoin framework. It would create a new category of stablecoins called “asset-referenced tokens.” This new class will be subjected to a relatively lighter regulatory regime than other crypto asset types.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
