MiCA Regulation: Overview of an Unprecedented Law Ahead of a Potential Crypto Bull Run

For several years, cryptocurrencies have experienced a particular boom that is reshaping the global financial ecosystem. This trend, which fits with the spirit of the times, was until recently largely impeded by the absence of regulation in the crypto sector. This situation posed risks of anarchy and led to some catastrophic events in recent months. To address these concerns, the European Union (EU) has taken the lead by introducing its regulation on Markets in Crypto-Assets (MiCA). As several analysts anticipate a bull run in the crypto market, many specialists believe that the MiCA legislation will be one of the catalysts for this momentum. Let us examine this in light of the potential for groundbreaking crypto regulation soon to be fully operational.

Retrospectives on MiCA and the Ambition of its Normative Contributions

Enacted in July 2023, MiCA establishes a regulatory framework for the European crypto landscape. This law essentially acts as the missing link in the European Commission’s digital finance policy. A strategy that notably includes a pilot legislative proposal to explore distributed ledger technology in financial services exchange and settlement.

Thus, MiCA fundamentally emerges as a sort of unprecedented financial panacea. Especially since its scope goes beyond classic financial regulations, to encompass all crypto-assets. But not only that, its provisions also extend to securities and electronic money, which are not currently covered by existing European regulations. Not to forget that this law also applies to Crypto-Asset Service Providers (CASP) operating within the European crypto industry, regardless of their location.

As we can see, MiCA aims to be as comprehensive as possible in terms of regulation. This is by design, as its overall goal is to provide regulatory clarity while protecting investors from the abusive use that cryptocurrencies are often subject to. This is why it promotes compliance with rules related to anti-money laundering and the financing of terrorism.

The ambition is more broadly to maintain financial stability and protect stakeholders against market abuses and manipulations. A means to promote a safer and more innovative crypto sector. Fundamentally, MiCA fills a legal gap in the area of cryptocurrencies. However, it excludes from its scope certain specific areas, such as NFTs, for example. It also excludes decentralized autonomous organizations (DAOs) and decentralized financial operations (DeFi), except under certain conditions. Nevertheless, MiCA is perceived as one of the pillars of the envisaged bull run for the crypto market in the coming months.

MiCA as a Catalyst for the Upcoming Crypto Bull Run

With the MiCA standard, the EU has made a significant legal impact. It is one of the few laws in the world to regulate crypto activities as exhaustively. While it is not perfect, this advancement is widely praised by the industry’s stakeholders worldwide. And in a context of stalling U.S. crypto regulations, experts unanimously say that MiCA will support the attractiveness of Europe’s crypto market. Now, crypto heavyweights view this region of the world as one of the most conducive places for their activities to thrive. And for good reason, MiCA has the exceptional advantage of establishing a set of crypto rules valid for all 27 EU member states. With this unified structure, crypto firms no longer need to grapple with specific, often disparate, regulations.

In these circumstances, a massive influx of crypto firms is anticipated by experts, as soon as MiCA becomes fully operational. This is not currently the case. While the crypto market has seen a certain resurgence in recent weeks, many experts believe that the MiCA law will be one of the catalysts for the next bull run.

They explain this by the fact that the emergence of standards such as MiCA could break the current dynamic of regulatory uncertainty. A trend that could result in attracting several conservative institutional investors who have stayed away from the crypto ecosystem. Consequently, this could pave the way for a new cycle of massive crypto adoption that would propel prices to new highs thanks to an influx of capital. In some European countries like France, active preparations are being made for this prospect.

What About the Transition Period Towards MiCA : The Case of France

In France, financial regulatory authorities, notably the Financial Markets Authority (AMF), are paying particular attention to MiCA. They welcome this text by actively working on the transition towards it. This transition to the MiCA regulatory framework is organized in accordance with the law containing various adaptation measures to European Union law, known as DDADUE law.

This norm specifies measures related to MiCA, granting a transitional period of 18 months to Digital Asset Service Providers (DASP). In particular, those with simple registration, enhanced registration, optional approval, or providing specific services.

According to this law, these players can maintain their services exclusively in France during this period. It also empowers the government to take measures, within a year, to align national law with MiCA.

Furthermore, in collaboration with stakeholders, the AMF should adjust its regulations and doctrine to align the DASP approval requirements with MiCA. This, by clarifying its policies and examining the possibility of a modular approval.

It should be noted that MiCA comes into full effect from June 2024, with application expected from January 2025. In this regard, the AMF is also working with the Prudential Supervision and Resolution Authority (ACPR) to facilitate the transition from the French framework to the European one. All this, by actively participating in the drafting of implementing texts with the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). These texts will be subject to public consultation before their final publication in 2024. This should allow crypto industry players to comply with the technical standards before the entry into force of MiCA.