The limitations of the EU’s new cryptocurrency regulations

Mar 16, 2023 | wjb news

EU countries have been waiting for a long-awaited set of password standards-encrypted Asset Market (MICA) policies and regulations-and the final online vote has recently been extended to April 2023. This is not the first delay-previously, due process in Europe rescheduled the process from November 2022 to February 2023.

However, this setback is completely caused by technical difficulties, so MICA is still on its way to becoming the first comprehensive pan-European cryptographic architecture. But this will happen in 2024, but in the second half of last year, when the mica text was basically ready in advance, the field got a series of shock vibrations, giving regulators a whole new headache. There is no doubt that in an industry as vibrant as passwords, there will be some new hot topics throughout 2023.

Therefore, the key is mica, because of its shortcomings, whether it has the right to become a real "comprehensive structure" in a year's time. Or, more importantly, whether it will formulate a set of reasonable rules to avoid similar TerraU.S in the future. Or the collapse of FTX?

There is no doubt that problems are on the mind of Natalie Nazar, president of the European Central Bank. In November 2022, in the FTX scandal, she declared that "there will be a MICA II, including this broader focus on regulation and regulation, which is very necessary."

Cointelegraph contacted a range of sector stakeholders to find out whether customer regulation of encryption market assets is still sufficient to make the encryption sales market work in Europe.

EU Defi policies and regulations still have a long way to go.

A major blind spot of MICA is decentralized equity financing (DEFI). Generally speaking, the motion at this stage does not mention the later organizational and technical approach of the cryptographic industry. when mica comes, it will certainly become a problem. This not only led to the attention of Geoffrey Brojinger, general counsel of the Quadrata lawyer firm. In an interview with Cointelegraph, Blockinger envisioned a dilemma scenario for the future:

"if the Defi agreement seriously affects the major centralized trading centers because of a widespread loss of confidence in these operating models, new standards may be proposed to alleviate everything from money laundering to consumer protection."

Bittrex GlobalCEO Frederick Lynch also believes that there are global problems with Defi regulation, with the exception of Mica. Lynch says Defi is essentially unregulated and, to some extent, even low-priority queues for regulators, because most customers are encrypted mainly through intermediary trading centers.

However, Lynch told Cointelegraph that just because regulators can most easily regulate and access intermediary trading centers, it does not mean that Defi is not important in this area.

Just because there is no professional unit targeting DEFI does not mean it is unlikely to regulate. In an interview with Cointelegraph, Terrance Yang, chief executive of Swan Bitcoin, said that Defi can be translated into traditional financial expressions to some extent, so it can be regulated:

"Defi is just a bunch of derivatives, debt, loan equity pledge financing, disguised as something new and innovative."

Yang believes that loan guarantee password commodity yields, loans and loans are of interest to investment banks and the banking industry and should be subject to similar regulation. In this way, the applicability rules laid down in mica are likely to be helpful in fact. For example, the new Defi project is likely to be considered to be an encrypted property service project in the word Mica.

Borrowing and betting

Defi should be the most noteworthy, but it is by no means the only limitation of the upcoming Mica. EU national structures have failed to deal with the growing area of password lending bets.

Fully taking into account the recent bankruptcy of loan giants such as Celsius, and the growing concern of US regulators about the chip business, due process in EU countries also need to withdraw something.

Ernest Lima, a partner at XREG Consulting, told Cointelegraph: "the collapse of the sales market last year was caused by poor practices in this area, such as lack or impossible risk control and dependence on useless collateral."

Yang elaborated on the unique problems of the ERobin Alliance in the regulatory level of loan chips. Ironically, at this stage, compared with the traditional European financial system, the password industry has an asymmetric advantage in looser regulation. Compared with unregulated password trading centres, password borrowing and gambling platforms, traditional banking or investment banks, and even "traditional" financial wealth management companies are overregulated:

"if market trading is not allowed to operate without regulation at all, it is very likely that apart from fraud, standards will treat everyone who gives the same economic development goods to Westerners equally."

Another concern is that the dynamic password (NFT) cannot be changed. In August 2022, European Commission consultant John Kirstens revealed that although there is no definition in MICA, it regulates NFT as a general encrypted loan currency. In practice, this often means that foreign investors in NFT are equivalent to encrypted property service providers and are required to submit timely accounts for their activities to the local government's German Securities and Market Supervision Agency (European Securities And Markets Authority).

There is no reason to feel cheerful.

To some extent, the cryptographic field holds a soft and positive attitude towards mica. Although the text contains some rigidity, in terms of the legality of the sales market, this kind of behavior seems generally reasonable and opportunistic.

With all the turmoil in 2022, will the next iterative update of the EU national password framework-the hypothetical "mica-2"-be more binding or skeptical about passwords? Lynch said: "the further delay faced by mica only shows the sloppy approach adopted by the European Community in introducing the law, which is now more appropriate than ever." in particular, full consideration has been given to recent market events. " He declared that stricter and faster inspections of the industry must be carried out.

Lima also predicts that a closer approach will be taken, involving a large number of difficulties. For due process in Europe, it is important to keep up with regulatory escalation:

I expect that some of the standards and manuals being developed will adopt a stronger approach, and such standards and manuals will become part of the mica system. You may also see more stringent checks on authorization, permission and regulation on the regulatory platform, but by the time the law is amended, the 'password winter' has already thawed.

In the final analysis, we should not be caught up in the prejudice about the malaise of the equipment of EU officials.

It is still a country in the European Union, not abroad, where at least one large and medium-sized legal plan has become laws and regulations, and the main influence of mica is much more critical in meaning. Urgent problems such as encryption can in fact be covered by laws or administrative decrees that are less pioneering. But this sentiment is still particularly important-the last time you heard from the European Union, it decided to require financial institutions to keep the open-ended risk weight of its digital currency at 1250%.