It is the first time that cryptocurrencies such as bitcoin, issuers of cryptocurrencies and providers of, for example, services for exchanging virtual cryptocurrencies will be subject to European rules.
With the agreement, the EU once again ranks as a trendsetter in digital legislation. After all, six years ago, European privacy legislation was raised to a worldwide standard.
Earlier this year, member states also agreed on new rules for large tech companies, including market power and unfair competition: the Digital Markets Act. The Digital Services Act added a sister package to make the internet safer and more reliable.
According to French Finance Minister Bruno Le Maire, the MiCA is “historical legislation that will end the Wild West that has become the crypto market.” In a press release, he wrote: “The new rules will better protect EU citizens who have invested in crypto and prevent its abuse by criminals.”
The new legislation obliges service providers in the crypto sector, among other things, to be more transparent, both about their own financial position and about the coins they offer. “Crypto providers will soon have to write a white paper about every currency, with all its properties and risks. As a result, investors are better able to buy currencies that suit them well,” expects Teunis Brosens, chief economist digital affairs at ING.
“Now there is no protection whatsoever for crypto investors when something goes wrong. They are completely on their own,” says Brosens. “If this legislation goes into effect in 2024, investors have somewhere to file a complaint. And they finally enjoy legal protection.”
Service providers in the crypto sector also need to improve their business structure and put their computer systems in order. In this way, they should be able to thwart cyber attacks, which should reduce the number of scams. Brosens: “It actually concerns very basic requirements for running a financial institution.” That is not superfluous: last year cryptocurrencies consumers were defrauded for billions of euros.
The chance that the legislation will deal with all the problems in the crypto market is equally small, according to Brosens. “The problem with EU legislation is that it always lags behind in practice. Technological developments are moving very fast, especially in the field of crypto.”
For example, providers of Non-Fungible Tokens (NFTs) — ideal digital investment objects — are not yet covered by the MiCA, says Brosens. After all, when European Union officials started writing the MiCA two years ago, NFTs had yet to experience their major breakthrough. Brosens: “With these laws and regulations, a large part of the Wild West is being pulled into the raked world. But the Wild West will certainly survive.”