Despite initial concerns about its effect on the European crypto industry, the Markets in Crypto-Assets (MiCA) regulation is proving a benefit to crypto customers and exchanges alike.
The EU’s first regulatory package concerning cryptocurrencies has been in effect for almost 200 days, and since then, a number of prominent exchanges has set up operations on the continent.
In its first two quarters of operation, MiCA has shirked critics’ expectations that it would “destroy” the European crypto industry by overburdening exchanges with regulations and requiring users to identify themselves to stay on regulated platforms.
Rather, the regulatory regime is set to consolidate the European crypto industry and serve as a catalyst for investor adoption.
How crypto companies benefit from MiCA
There are challenges to MiCA compliance for cryptocurrency firms. Firstly, MiCA is a relatively new law, and there is no guidebook for how to ensure compliance, which can lead to uncertainty during the application process, said Bybit EU managing director Mazurka Chen at a July 10 press conference.
Secondly, there is the expense. It takes a significant amount of time, effort and money to ensure compliance, which is a cost more easily borne by large, established companies.
Exchanges that are less able to bear that expense or view the MiCA ramp-up as “regulatory theater,” per Dante Disparte and Patrick Hansen — respectively the chief strategy officer and director of EU strategy and policy at Circle — may be forced to leave the market.
This may be a windfall for responsible local actors, according to the Circle executives. “MiCA represents an opportunity […] to grow a uniquely European crypto asset market.”
Related: What is Markets in Crypto-Assets (MiCA)?
For stablecoin issuers, this means that non-EU-related products will vanish, leaving a gap and significant demand for MiCA-ready products to close the gap, stimulating, rather than dampening, the local stablecoin ecosystem.
For exchanges, the bigger fish could gobble up the smaller ones, increasing market share. OKX Europe CEO Erald Ghoos previously told Cointelegraph that such a consolidation will separate “serious market players from unlicensed actors and [drive] healthy, trust-based competition.”
Another MiCA benefit for crypto companies is the relatively equal legal footing they are on compared with traditional banks and asset trading services like eToro.
According to Georg Harer, managing director and head of global compliance at Bybit EU, MiCA-regulated firms have the same Anti-Money Laundering (AML) standards as major banks, so “there is no reason not to work with the MiCA license company anymore.”
How MiCA benefits European crypto investors
This more equal footing with traditional financial institutions also has knock-on effects for customers, such as easier bank transfers, broader institutional access and stronger protections for client assets.
“With the license, we can onboard directly, and the client will be able to make deposits and withdrawals very easily from their own bank,” Bybit CEO Ben Zhou told Cointelegraph. “Then also, you have family offices, different types of trading institutions that can onboard on to us now because previously, maybe they were concerned about the licensing issues.”
Licensing also lets exchanges expand their offerings. With MiCA and the Markets in Financial Instruments Directive (MiFID), crypto exchanges can trade in traditional assets such as stocks and commodities, providing more familiar asset offerings for customers.
Many of the provisions outlined in MiCA relate to investor protection and market integrity. Exchanges are subject to rigorous reporting and consumer protection requirements.
Related: Malta’s MiCA licensing comes under scrutiny from EU regulator
While this undoubtedly increases the regulatory burden on cryptocurrency exchanges, it also provides familiar guardrails for investors concerned about entering the cryptocurrency space. Harer said that the most important benefit for customers of MiCA-regulated entities is these protections.
These include “the strict safeguarding of clients, assets and funds. You may remember FTX and others, where they reported that they had billions and billions in clients’ assets. And then, when somebody looked closely, it turned out that it was a lie or they were misused. This is now very, very strictly regulated.”
More crypto exchanges are applying for a MiCA license
Major American exchange Coinbase secured a MiCA license on June 20, with OKX and Bybit receiving theirs a week later.
Zhou said the growing number of exchanges on the continent is “an extremely positive trend.”
MiCA also has the potential to influence other regulators. Zhou said, “A lot of the regulators are waiting for MiCA. And you see the new framework being kind of borrowed or copied across the world.”
As more exchanges enter the European market, competition is expected to intensify. Other regions are taking notice and moving to establish comparable crypto regulatory frameworks, as both customers and service providers gravitate toward jurisdictions with clear regulatory guardrails.
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