The MiCA regulation in Europe has been launched, but can the encryption industry keep up?

Source: Cointelegraph Original text: "The MiCA regulation in Europe has been launched, but can the crypto industry keep up?"

The EU's regulation of the crypto asset market—commonly known as MiCA—is currently in a critical implementation phase. The legislation aims to unify the cryptocurrency regulation across the 27 EU member states, promising a clear regulatory framework, consumer protection, and long-term market stability. However, as the implementation process begins, issues have started to emerge.

In this week's "Byte Insight" feature, we delve into the key provisions of MiCA that have come into effect, particularly the regulatory requirements regarding stablecoins, and why some major market participants are refusing to comply with these regulations.

Starting from January 2025, cryptocurrency asset service providers (CASPs) will begin applying for licenses to operate legally within the EU. According to the regulations of different member states, existing institutions can obtain a transition or "grandfathering" period of up to 18 months to achieve compliance. Nevertheless, as the deadline approaches, companies are forced to take swift action.

One of the earliest and most controversial provisions of MiCA involves the regulation of stablecoins. According to the law, no stablecoin may be offered to EU users unless its issuer obtains authorization in the EU and publishes a white paper approved by regulatory authorities.

The bill also includes strict asset reserve requirements, governance mandates, conflict of interest prevention, and marketing restriction clauses. Issuers are even prohibited from providing token interest, which removes a common user adoption incentive.

The most widely used stablecoin in the world, Tether's USDT, has announced that it will not seek compliance with MiCA regulations, which means that exchanges may soon be forced to delist this cryptocurrency across the EU. This will have a significant impact on liquidity, retail access, and DeFi activities in the region.

Tether CEO Paolo Ardoino told Cointelegraph reporter Gareth Jenkinson at the Token 2049 conference:

"The reason is not the fear of regulation or compliance requirements... My concern with MiCA is that this type of license is very dangerous when it comes to stablecoins, and I believe it poses a greater risk to the European SME banking system."

On the other hand, other companies are actively adapting to the new regulations. The crypto custodian BitGo recently obtained a license compliant with MiCA standards in Germany, enabling it to provide services to institutional clients across Europe.

BitGo's Go Network and European Sales Director Brett Reeves revealed to Cointelegraph that obtaining licenses is not only about compliance, but also a measure to maintain long-term strategic alignment with the continuously evolving regulatory environment in Europe.

"We found that both the Federal Financial Supervisory Authority of Germany ( BaFin ) and European regulatory bodies are relatively easy to communicate and cooperate with. Although they sometimes raise tricky questions, their goal is to ensure that our processes are sound and meet standards."

We also interviewed Erwin Voloder, the policy director of the European Blockchain Association, who emphasized the need for a consistent interpretation at the national level and clearer guidance from regulatory agencies to prevent market fragmentation.

Please listen to the full interview of Byte-Sized Insight on Cointelegraph's podcast page, Apple Podcasts, or Spotify. At the same time, feel free to follow all the exciting programs offered on the Cointelegraph platform.

Related news: The stablecoin bill was passed in the Northern Mariana Islands, and the House overruled the previous veto.