​Circle sees signs for the growth of the adoption of cryptocurrencies in the EU

What’s new? Circle (the issuer of the USDC stablecoin) Director of Strategy and Policy in the European Union Patrick Hansen believes that the adoption of the Markets in Crypto Assets (MiCA) law by the EU authorities will have a positive impact on the industry. He says MiCA, which is the most comprehensive regulatory framework for cryptocurrencies, will attract institutional capital to the sector and allow banks to provide digital asset-related services, including the custody, exchange, or issuance of stablecoins, among others. Hansen expects widespread adoption of cryptocurrencies in the next four years.

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What are the pros of passing MiCA? The law will implement uniform rules and requirements for dealing with crypto assets for the 27 EU member states. By obtaining a license in one country, crypto companies will be able to offer services in a single European market. This will bring significant changes to the industry, as previously companies had to negotiate with the specific regulator of the country in which they wanted to operate.

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Once MiCA takes effect, offshore and unregulated companies will no longer be able to actively target EU consumers. This could result in MiCA-regulated crypto companies gaining a significant share of the EU market.

In addition, MiCA will likely lead to an increase in institutional investor activity in the EU crypto market. According to Bloomberg, only 4% of institutional funds in Europe invest in crypto assets. Regulatory uncertainty is one of the main problems holding institutional investors back from entering this market.

Creating regulatory clarity amid global uncertainty could attract capital, talent, and companies from elsewhere in the world, especially those willing to issue tokens, Hansen writes. Cryptocurrencies as an industry could be a huge opportunity for the EU’s economic and technological revival. However, the practical success of MiCA largely depends on implementation standards and enforcement practices that will be developed by EU supervisors over the next 12-18 months, the author of the article believes.

The longer the “regulatory vacuum” persists in the US, the greater the chances of MiCA becoming a global regulatory standard. Because industry players can have a big impact on MiCA’s success, Hansen urged all crypto projects and companies to work closely with EU supervisors over the next 12 to 18 months.

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More details about MiCA. The EU Council of Ministers finally approved the bill in June 2022. It is expected to take effect in 2024. MiCA requires crypto service providers to comply with rules aimed at protecting the interests of users.

All projects related to digital assets will be required to warn of potential investment risks. Trading platforms, such as exchanges, must be licensed to operate by the regulator, which will be the European Securities and Markets Authority (ESMA).

MiCA will require companies that provide digital asset custody services to verify the identity of their customers as part of anti-money laundering (KYC/AML). The document will also limit trading in unsecured EUR stablecoins to 200 EUR million per day. Among other things, MiCA will equate non-fungible tokens (NFTs) to securities.

In September, Binance CEO Changpeng Zhao said that the document would become a “global regulatory standard copied around the world.”