The global landscape of crypto-asset regulations is diverse and, even though it is getting more complex, many regulators are still choosing to wait and see how this space develops and what others will do. Right now, all eyes are on the European Union and its bespoke approach to regulating crypto assets.
As part of an expansive digital finance package announced in September 2020, the European Commission, or EC, issued a regulatory proposal titled Markets in Crypto-Assets, or MiCA. The proposal is now making its way through the legislative process and is subject to intense debates. This important regulatory step has been accelerated by concerns over the increasingly fragmented national regulatory landscape for crypto assets within the EU.
The other important trigger for regulatory scrutiny has been the rise of stablecoins. Stablecoins have been around for a few years — with the first stablecoin, Tether (USDT), dating back to 2014 — but they received little regulatory attention until June 2019, when Facebook’s project Libra (which was later rebranded as Diem) was announced. It was a wake-up call for many authorities, as they came to realize that global stablecoins could quickly reach a large scale due to strong network effects, and that this could have systemic implications for the financial sector.
Crypto assets under MiCA
The EC stepped in to capture and regulate all crypto assets not covered by existing EU financial services and proposed a bespoke, comprehensive, mandatory regime for crypto assets under MiCA. The regulation will apply directly across the EU, without the need to transpose it into national laws, and will replace all national frameworks. It aims to provide legal certainty for the industry and market participants, and facilitate legal harmonization.
MiCA establishes a set of…