Whilst being in effect for only a year, Europe’s Markets in Crypto Assets (MiCA) groundbreaking crypto regulation is already shaking up the continent’s market.
The European Union’s (EU) restrictive rules under MiCA have already seen major stablecoin players such as Tether having to delist a stablecoin, whilst others like Circle have already gained an early foothold.
To discuss MiCA’s early impact, Bitpace CEO Anil Oncu reveals how he believes MiCA will provide both positives and growing pains for crypto operators in the early onset, as well as whether it will set a gold standard for other policymakers to follow.
Anil Oncu, CEO of Bitpace
Firstly Anil, what has been the initial reaction you have seen from the industry to MiCA’s restrictive rules and are they being viewed as good or bad for the sector’s growth in the EU?
The sentiment across the crypto industry has expectedly been very mixed. Whether these regulations will be good or bad for the crypto payments industry is a matter of perception and how a business chooses to look at it.
Of course, stablecoin regulation does pose a potential threat to the decentralised nature of cryptocurrency operations and it’s understandable that many are wary of any enhanced scrutiny and market restrictions that might arise.
The question of balancing privacy and transparency is constantly being navigated, and new KYC and AML considerations brought in by MiCA will obviously impact the way in which that pendulum swings. Other considerations such as compliance in HR, cybersecurity and risk management also need to be taken into account.
The bottom line, however, is that if crypto is to achieve mass adoption and become a mainstay in our everyday lives in terms of the way we transact with business, then regulation is necessary. Stablecoins, if evolved and integrated in a mature manner, could actually significantly boost the stability and long-term prosperity of the crypto payments industry in Europe.
This doesn’t mean that regulation should be imposed at free will in a way that only prioritises traditional financial values; it should be adaptive, not rigid. But the prospect for stablecoins to reduce market volatility and increase legitimacy and trust within the wider population is too strong to ignore.
Yes, it’s going to come with an element of administrative burden and potentially raise the barriers to access for payment solutions, but having a clear path towards compliant standards and resilient security measures is ultimately going to position the European market as a competitive global leader.
Will the delisting of Tether’s European-backed stablecoin from Bitstamp be the first of many stablecoins to be delisted on exchanges in your opinion, and if so how come?
Major European exchanges are having to remove USDT from their listing, and there will likely be more delistings to come. MiCA requires more responsibility from exchanges when it comes to ensuring stablecoins listed on their platform are compliant. If they fail to comply, they should expect the inevitable.
Those exchanges that have already made a move have simply been among the first to set the standard. It won’t be a surprise if more exchanges follow suit over the next six months.
Could these stablecoin rules deter issuers from the European market, and how detrimental could this be for the sector?
It really depends on the mission and values of the issuer and how they view the European market. Circle (USDC) obviously were not deterred because they have a clear desire to issue a EURC.
But it’s likely that stablecoin issuers who perhaps don’t have the same resources or reputation as Circle might weigh up their own administrative complexities, liquidity constraints and competitive pressures and indeed be put off of advancing into the market.
Overall though, avoidance won’t be sufficient enough for stablecoin regulation to have a detrimental effect on the European sector.
On the other hand, we saw Circle gain MiCA clearance recently. How important will this be for the company’s stablecoins growth?
The creation of a EURC is going to plug Circle straight into a whole new user base of traders, investors and business, so it’s ultimately a very strong move. Diversification of their geographic offering alongside USDC is going to reduce their dependence on a single currency and essentially improve liquidity in trading pairs that will fortify their ecosystem.
With EURC able to integrate into their existing suite of products and services, it’s going to make their ecosystem instantly more attractive to users and developers. It’s a bold move, they’ve wasted little time and will benefit from getting ahead of the curve.
Could MiCA, once it has been consolidated, help bring about a new adoption wave for stablecoin and other crypto payments?
Ultimately, whilst many in the industry understandably regard regulation from traditional institutions as a threat to the realisation of crypto’s potential, it remains the most likely path to adoption. Without MiCA, Europe’s crypto payment landscape will struggle to mature beyond a fragmented and volatile ecosystem.
Stablecoin adoption can serve the crypto payments industry by encouraging crypto cynics to exercise more curiosity, and eventually trust in cryptocurrency. Consumers need to feel protected and businesses need to be assured in their ability to solve transactional disputes.
Harmonised regulations will facilitate more secure and seamless cross-border crypto transactions and make it easier for businesses and consumers to connect in a way that is free from geographic constraints.
Large stablecoin issues will also become subject to safeguarding precautions and help to prevent the systemic risks that’s existence would hinder crypto adoption.
With MiCA being one of the first comprehensive regulatory frameworks, will this spur on other global policymakers to follow suit and potentially even implement similar restrictive rules?
It’s not necessarily the case that MiCA is going to spur on other global policymakers to follow suit; by now, most jurisdictions will be exploring the development of effective frameworks of their own accord.
The pace at which MiCA is progressing, however, will definitely be monitored by other regional governments and institutions, who will certainly be wanting to keep up. Over the next five years, rules and regulations will evolve and adapt in different ways – potentially restrictive in areas, and more flexible in others.
The bottom line is that regulatory evolution is inevitable and if crypto payments are to become widely adopted, this is all a necessary course of the action that makes up the overarching, long-term journey.
Lastly, Anil, and thank you for your time. In five years time, will MiCA help make crypto and digital assets a more mainstream accepted form of payment, or do you forecast more amendments before it can be truly accepted?
There will of course be more amendments over the coming years, but with each set of developments will come more progress toward mainstream adoption.
Cryptocurrency and digital assets will become fully integrated within day-to-day transactional protocols and DeFi will become seamlessly connected to TradFi procedures. It’s not when, and not so much even how or why, it is more so to do with the underlying why.
The declining state of the geopolitical and financial landscape makes transformation on all fronts a prerequisite for the avoidance of global collapse. Cryptocurrency and its ability to transform financial sovereignty in terms of ownership and global connectivity makes it an unavoidable candidate to emerge as an irreplaceable piece of that.