MiCA: European crypto regulation and the risks such as Binance

The new European crypto regulation (MiCA), which will come into effect next year, will also mitigate risks similar to those brought to light by the Binance case.

This is according to European Commission policy officer Ivan Keller.

Official statements on the Binance case and the link to the crypto regulation MiCA

Yesterday Keller spoke at the MoneyLIVE conference in Amsterdam, and of course he also spoke about the Binance case.

In fact, the news of the $4.3 billion settlement with the US Department of Justice came just the day before Keller’s keynote.

Ivan Keller is part of the Securities Markets Unit of the Directorate General for Financial Stability, Financial Services and the Capital Markets Union (DG FISMA). So he is the right person to talk about these things. 

According to Keller, recently “several unfortunate confirmations” have emerged indicating that a path to robust regulation of crypto markets has been taken, citing both last year’s FTX case and this year’s Binance case. 

In particular, he emphasized that the new MiCA regulation will mitigate some of the risks, and more importantly, provide regulators with clearer levers and powers in overseeing these entities. 

He also stated that the goal of MiCA is to promote innovation but addressing risks to consumers while also promoting market integrity, financial stability and monetary sovereignty. 

It should be mentioned that the European Union’s MiCA is by far one of the world’s first comprehensive legal frameworks on cryptocurrencies, while the U.S. on the other hand does not yet have anything similar. 

EU vs US

The US is currently the largest crypto market in the world. 

It is no coincidence that the biggest crypto exchange failure was precisely that of a US exchange, FTX. 

Actually, both cases cited by Keller took place in the US, and certainly not because the EU has MiCA. 

In fact, MiCA was not finally approved until June of this year, months after FTX’s bankruptcy. Moreover, it will only come fully into effect next year. 

As of now, however, the new European crypto regulation is already making things easier not only for the authorities, the judiciary and law enforcement, but also and especially for the operators in the industry, who now know how they should behave. 

The US, on the other hand, from this point of view is still in the high seas, totally lacking any specific crypto regulation. 

Suffice it to say that Coinbase has officially asked the SEC for explanations, and the SEC has refused to give them. Indeed, it is not up to government agencies to legislate on the matter, or to clarify how regulations should be interpreted. Instead, it is for Congress (i.e., the U.S. Parliament) to legislate, and for the courts to clarify how the rules are to be interpreted. 

The EU’s advantage

It is quite clear from such a picture that at present the EU has a real advantage over the US in terms of regulatory clarity in crypto. 

However, on the one hand it has to be said that the main European crypto hub, namely Switzerland, is not part of the EU, and on the other hand the European market is significantly smaller than the U.S. market. 

At this time it is still difficult to imagine a mass migration from America to Europe of large global crypto operators, not least because there are even more favorable jurisdictions (such as Dubai). 

In case, however, in the years to come the situation in the EU becomes increasingly favorable, not least because of regulatory clarity, and perhaps in the US it remains so instead, sooner or later such a migration process could also begin. 

At present, on the other hand, MiCA has not yet fully come into effect, all the consequences it will have are not yet clear, and especially once next years’ elections are over, the waters in the political landscape in the U.S. will calm down a bit making it perhaps possible for crypto regulation to be passed by them as well. In fact, a bill is already there, but it has not yet managed to gather enough support to be passed. 

Binance: the future of European crypto markets and MiCA regulation

Ivan Keller also pointed out that the European Securities and Markets Authority, together with the European Banking Authority, is also developing the technical standards that will underpin the implementation of MiCA rules.

These are 40 technical standards, which are currently still being drafted and consultation with the public is still ongoing. 

So there is not yet a complete framework that can be judged as a whole, and it will presumably take almost another year before we get to the full and final version of the regulatory and enforcement framework as a whole. 

The deadline is June 2024, but it cannot be ruled out that the final details may also come in the following months. 

At this time, therefore, it is still effectively impossible to get a precise idea of the real consequences of this epochal shift for the European crypto markets, but it will not take much longer to get the full picture.