Opinion: MiCA poised to shape the EU into a crypto adoption hub in the coming year
Disclaimer: The author’s views and opinions expressed in this article are their own and do not necessarily reflect the views and opinions of crypto.news’ editorial team.
When the Markets in Crypto-Assets Regulation (MiCA) was enacted into law in June 2023, it marked a significant milestone for the European Union (EU). Covering twenty-seven countries and representing almost twenty percent of the global economy, MiCA laid the groundwork for crypto regulation. However, the implementation of MiCA will be a gradual process, spanning twelve to eighteen months, as the European Securities and Markets Authorities work on developing and refining the necessary Level 2 and Level 3 measures.
In 2024, the EU will begin the process of fully implementing MiCA, followed by collaborations and customizations to extend its impact internationally. This includes EU financial institutions seeking qualified sub-custodians to enhance their operations. The ultimate goal is to establish a unified framework for crypto exchanges and firms across all EU jurisdictions, eliminating the need for separate licenses in each country. However, unique characteristics of individual countries will still need to be addressed. For example, if a company is licensed to offer crypto services in Germany and wants to operate in France, they must comply with France’s specific KYC and AML requirements.
The year ahead will be filled with governments hashing out details, paperwork, and form-filling among various parties involved. With the introduction of MiCA, there is no room for the familiar refrain of “We’ve always done it this way.” These sweeping crypto regulations are unprecedented globally, and there will be a learning curve as companies adapt to the new processes. The proactive preparation of companies in 2024 will pave the way for smoother compliance with MiCA and the benefits it offers.
In 2024, it is highly likely that spot Bitcoin exchange-traded funds (ETFs) will be made available in the EU. Initially, these ETFs will be accessible to institutions, followed by their availability to retail clients after thorough scrutiny. The current bull market makes it more likely for spot Bitcoin ETF applications and approvals to be expedited. The fear of missing out on financial gains drives high trading volumes, making the adoption of new digital asset products seamless for the crypto-savvy generation.
Once MiCA regulations are fully operational, we can expect customizations that will allow more individuals to participate in the financial landscape. This may involve bilateral agreements between the EU and smaller jurisdictions, enabling them to benefit from increased trading volume. For example, smaller Swiss banks without EU branches could potentially enter bilateral agreements with the EU to leverage the advantages of MiCA.
The adoption of MiCA by Europe contributes to setting international standards for anti-money laundering and combating the financing of terrorism (AML/CFT) regulations. Organizations like the International Organization of Securities Commissions (IOSCO) have developed standards that can serve as guidelines for other jurisdictions. Rather than reinventing the wheel, regulators can learn from what other regions are doing and incorporate successful approaches into their own legislation. Although fully standardized international regulations are unlikely, providing clarity about rules and processes is crucial for crypto businesses to operate confidently and foster growth.
With the implementation of MiCA, every bank and registered asset manager in the EU can easily apply for a crypto custody license. However, many financial institutions, such as banks, may choose not to take on the additional responsibilities and technical expertise required. Instead, they may opt for sub-custodians to manage their digital assets, ensuring a clear separation of functions and funds. Banks will prefer established custodians with a proven track record of managing volatility and safeguarding digital assets. Additionally, selecting a custodian that does not oversee its own exchange allows for accurate segregation of function.
Choosing a sub-custodian strategy is just one of the many decisions that key stakeholders will need to make as they navigate the implementation of MiCA and its subsequent collaborations and customizations.
Sven Mohle, the Managing Director of BitGo Europe GmbH, brings over 25 years of experience in driving growth in financial services and sales. His responsibilities include overseeing markets, operations, products, and cold storage. Prior to BitGo, Sven played a pivotal role in establishing Bloomberg as a dominant player in the EMEA region (Europe, the Middle East, and Africa) during his eight-year tenure. Sven holds Investments and FSA Financial Regulation certificates from the Chartered Institute For Securities & Investments.
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