By Peter Curk, CEO of ICONOMI
It’s a time of change in cryptocurrency sector. With the introduction of the European Union’s (EU) Markets in Crypto-Assets (MiCA) regulation, there’s a sense of uncertainty. So used to playing outside of the rules, crypto companies are suddenly finding themselves under scrutiny and restricted, at least within Europe. Industry outsiders are saying the move is long overdue and should be replicated in other territories. However, many of those within the industry are worried about the impact that MiCA will have on the innovation of what has been previously marked out as a uniquely pioneering space. Everyone is watching the EU. But while others are watching for progress, could the UK learn from the EU’s mistakes, and use them to secure a stronger position for itself in the cryptocurrency space?
Why so much interest in MiCA?
MiCA is the first attempt at crypto regulation anywhere in the world. While there have been multiple calls for regulation of an industry that has become known for its bad actors, high risk, and general opacity, the undertaking has been viewed as so monumental that it’s been difficult to know where to start. Regulators must take steps to protect investors from some of the most common risks in the sector. And regulation could help to ensure financial stability, readying the crypto market for closer integration with traditional finance. But how do you do that without stifling the rapid and regular innovations that the sector is known for? And how do you properly regulate such a densely intricate and consistently evolving industry without leaving any backdoors for shady elements to take advantage of and unsuspecting investors to fall through?
To all intents and purposes, MiCA is an active and live experiment. It is attempting to achieve what a lot of people have believed impossible. Unfortunately, that also means regulators will make mistakes.
Where is MiCA going wrong?
There are some major problems in the cryptocurrency sector right now.In addition to a lack of transparency, significant fraud exists, and consumers have a right to protection. So, there’s little question of whether MiCA has come from a place of necessity. The questions that most industry stakeholders have instead relate to the approach that the regulation has taken, and there are four key areas of concern.
Regulatory technical standards
MiCA’s regulatory technical standards (RTS) were not published until the end of 2024. This is more than 18 months after the introduction of the bill. Since these standards operationalise MiCA’s framework, industry stakeholders consider the timing very tardy. It resulted in considerable uncertainty within the industry.
Industry development
The fluidity of crypto has always been one of its defining features. Many believe that MiCA puts too many restrictions in place. It will ultimately stifle the industry’s ability to evolve and innovate. Causing further concerns about a knock-on effect on innovation and industry development in the wider EU. Starting a new crypto business in the EU has become far too expensive, which threatens the industry’s future.
Consumer benefits
Regulatory costs inevitably pass on to consumers through increased fees and tariffs. This isn’t just unfair, it could deter newcomers from dipping a toe in the crypto market. This will reduce investor numbers and the cash that flows through the sector.
Stablecoin rules
Stablecoins are broadly too volatile. As such, they can act as a conduit for risk between traditional and crypto markets. The new MiCA rules do not adequately guard against the potential for unstable stablecoins to endanger both the crypto markets and the EU’s wider financial ecosystem.
These issues prompt regulators and industry leaders to question whether the MiCA regulations are fit for purpose, creating an opportunity for others to improve upon them.
How could the UK take advantage of the problems with MiCA?
MiCA offers a couple of avenues of opportunity for the UK.
Firstly, there’s the learning potential. The UK’s Financial Conduct Authority (FCA) is already in the process of building a comprehensive regulatory framework for cryptoassets, with an aim to implement regulation next year. Taking notes on the shortcomings and restrictions from MiCA could – and should – be invaluable to that process, particularly in the regulation of stablecoins and the approach to growth and innovation.
Secondly, there’s the opportunity for the UK to strengthen its position within the global cryptocurrency market through scaling. As things stand, MiCA is impacting the appeal of the EU for crypto businesses, and many are looking to scale in new directions. While would-be investors have concerns about fees, meaning that they are also beginning to look further afield – my business, which is based in the UK and Netherlands, has already noticed an influx of customers. This opens two avenues for the UK to benefit from.
Regulation is an inevitable feature of cryptocurrency’s future. For too long, the sector has left investors vulnerable to exploitation, especially non-native crypto users looking to try something new. It’s easy to make mistakes and fall into traps. However, the approach is crucial to both its success and the future of innovation within the sector. The EU has made a start with this, and MiCA isn’t a terrible first attempt – but it’s not great either, leaving plenty of potential for other territories to improve upon and benefit from it. Including the UK.
About the author
Peter Curk is the CEO of ICONOMI, a leading platform in digital asset management. With a background in finance and blockchain, Peter is passionate about making crypto investing accessible and easy for everyone. Under his leadership, ICONOMI has grown into a trusted name in the industry, offering innovative solutions for individuals and institutions alike.