As the European Union implements its groundbreaking Markets in Crypto-Assets (MiCA) framework, the law’s primary promise of a unified market faces challenges.
In the most recent episode of Byte-Sized Insight, Cointelegraph examined the potential of MiCA to fulfill its commitments.
Promises vs reality
The regulation aims to streamline operations for crypto businesses by establishing a single licensing system throughout all 27 member states. Once licensed in one nation, firms would be able to “passport” their services across the region without the hassle of local regulations.
However, less than a year into implementation, national regulators from countries such as France, Italy, and Austria are expressing concerns that passporting may lead firms to favor jurisdictions with less oversight, a practice termed regulatory arbitrage.
“Regulatory competition in Europe is nothing new,” stated Jerome Castille, head of compliance and regulatory affairs for Europe at CoinShares.
“We saw retail trading platforms gravitate toward Cyprus and Malta under MiFID. With MiCA, we hoped for a different outcome. Yet again, we see companies opting for jurisdictions perceived as more lenient. If the perception arises that not all licenses are equal, the entire single market promise diminishes.”
According to Castille, the concern lies not in a deficit of rules but rather in inconsistent execution. “Europe already has a remarkably high level of investor protection, arguably the highest worldwide,” he noted.
“The primary challenge now is ensuring MiCA is fully implemented. Without clear guidance, national regulators are making independent decisions. This divergence can lead to regulatory arbitrage. If we manage this correctly, the market will become both secure and appealing for global players. Failing to do so could drive innovation elsewhere.”
Related: BitGo secures license to launch regulated crypto trading in Europe
Little fish big pond
For smaller businesses, the implementation is proving especially problematic. Marina Markezic, executive director of the European Crypto Initiative, pointed out that the disparity between regulator capacities and the rapid introduction of new rules could push startups out of the marketplace.
“Meeting compliance requirements in such a compressed timeframe is extremely challenging,” she remarked.
“For the larger entities, having single access to the entire EU market is beneficial. Unfortunately, for smaller companies, it poses a significant burden, risking their survival throughout this process.”
While MiCA represents Europe’s effort to take the lead in crypto regulation, its effectiveness will hinge on the consistent application of the rules throughout the region.
As Markezic pointed out, “There are 27 distinct national competent authorities overseeing the same regulations. Some are larger, others smaller, some more experienced, and some less so. This is a critical test for Europe to ensure we can supervise uniformly.”
Listen to the complete episode of Byte-Sized Insight for the full interview on Cointelegraph’s Podcasts page, Apple Podcasts or Spotify. Don’t forget to check out Cointelegraph’s full array of other shows!
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