Monoup analyses MiCA and its impact on crypto firms and users
Crypto businesspeople and financial market participants are concerned about the active implementation of new European regulation MiCA (Markets in Crypto Assets) and see potential challenges in future operations. Although anything new, especially new laws and rules, is often met with slight resistance, in the case of crypto industry, these concerns may be justified. Cryptocurrency was initially positioned as a way to create a decentralized economy, free from direct influence of governments and central banks, and open to everyone. This idea resonated with many crypto enthusiasts and ordinary users, but in practice, things turned out to be more complicated.
Crypto industry proved to be completely out of control, and along with its positive aspects, it brought negative ones. Frequent cases of asset theft or fraud involving cryptocurrencies are constantly in the newspapers, leading to the need to protect users from these risks. It is undeniable that the motives for regulating cryptocurrency lie not only strengthening industry's safety for unqualified investors. Most governments want to control the flow of cryptocurrencies, as they can be used to evade taxes and thus deceive the state. Additionally, banks and traditional financial institutions lose profits when the population switches to other methods of payment and asset storage. It is already clear that cryptocurrency will not disappear tomorrow; it is permanently integrated into our lives, and regulation is the only way for governments to control it and ensure the safety of using this asset. So, what is MiCA needed for?
What is MiCA?
MiCA is a new set of rules and regulations that will apply across the EU and govern the activities of crypto companies and related business entities. Previously, each country independently determined its attitude towards cryptocurrency, leading to opposite situations: from full support to outright bans and criminal liability for using cryptocurrency. This approach did not allow for a common denominator, and since the EU is a unified economic zone, it negatively affected convenience of using certain assets. Due to this complexity, European Commission decided to develop and implement a set of unified rules for cryptocurrency that will apply throughout the EU and cover all important aspects of this area. Thus, the framework will provide more clarity to investors, businesspeople, and ordinary users regarding the requirements and opportunities in the crypto industry and help protect against potential manipulations by dishonest market participants. Scandals with exchanges like FTX also influenced the acceleration of these rules.
Primarily, MiCA is intended to regulate crypto assets and divides them into several groups: EMTs, which are electronic or digital money tokens, ARTs, which are asset-referenced tokens, and other tokens that do not fall into the first two categories. MiCA does not regulate DEFI products that are 100% decentralized. However, it is sometimes difficult to determine whether a product is truly decentralized, so some types of tokens will still be subject to these laws. Therefore, new regulation will apply to companies whose business model directly interacts with regulated tokens, including:
- Custodial wallets;
- Exchanges that facilitate crypto-to-crypto or crypto-to-fiat exchanges;
- Cryptocurrency trading platforms;
- Consulting companies for crypto assets and companies managing crypto portfolios;
- Issuers of EMTs or ARTs.
In other words, all companies that have direct access to managing crypto assets and trading in the market.
What changes come with implementation of MiCA
Before getting worried, let's examine what will be actually new in the EU. The main points include:
- Unification of the European space under a single license. Once the regulation is fully adopted in all EU member states, crypto products will no longer need to be licensed separately in each country. By obtaining a MiCA-compliant license in the country of registration, companies will be able to operate throughout the EU and have full legal rights to do so. Previously, this was impossible due to different requirements and attitudes towards cryptocurrency in different EU countries. This part of the legislation can be considered a plus, as it allows for cost savings while operating legally.
- Increased requirements for crypto companies. Currently, jurisdictions like Poland and Czech Republic are the most popular for crypto providers due to their simplified requirements and quick authorization processes. However, with implementation of MiCA, all countries will be required to meet the same set of requirements. This will include having a local office in country of registration, an AML officer, and capital requirements. There will also be a set of requirements for policies and supporting a fair environment for trading. Companies must not only operate in the market but also directly contribute to its development and support its security. However, in some countries, it will still be more advantageous to open a business based on price levels, salaries, and rental and hiring opportunities.
- For companies issuing coins and tokens, business will become more complex. Due to the frequent risk of scam tokens, Europe has decided to protect users and prohibit anonymous issuance of tokens. Each token issuer must publish whitepapers and provide all information about themselves and their reliability. Investors will then decide whether to purchase such a coin.
- Stablecoins must be backed by real assets. Thus, algorithmic stablecoins will be blocked in the EU, and the rest must confirm their solvency and presence of funds to back their reserves. USDC has already succeeded in this regard, as stablecoin was able to confirm reserves equal to the amount of all issued coins and obtained MiCA authorization. However, more popular USDT does not meet the new requirements and has been banned in the EU since December 2024. There are rumors that company still plans to obtain approval and is moving towards this goal. Additionally, Tether has invested in a new project, Quantoz, in the EU, which will issue EURQ and USDQ, fully compliant with the new rules. This will densify the business into "European" and "rest of the world" segments as Tether itself will not obtain MiCA authorization.
Full compliance with the new rules is expected by mid-2026. Although they appear quite serious and demanding, most are logical and will genuinely benefit ordinary investors, which now include many Europeans. But what about businesses?
Should business be afraid of MiCA?
Crypto enthusiasts are concerned that doing business will become disproportionately difficult and question whether such an investment is worth it. Indeed, setting up a crypto company will no longer cost just a few thousand euros, and significant efforts will be required to meet the new rules. Hiring staff, renting offices, spending on AML tools and checks, licensing, and other expenses will amount to a considerable sum. However, there are some advantages.
Firstly, it is clear that the market will be rid of those who genuinely lack the funds to run such a business, reducing the number of scam tokens that collect investments and deceive inexperienced users. Cryptocurrency will become more transparent and understandable to the majority, with no more secrets. Additionally, AML solutions will not remain merely on paper but will be implemented everywhere, helping to prevent the use of cryptocurrency in various illegal schemes.
However, honest crypto companies will also face challenges, and anonymity and freedom of cryptocurrency will become a thing of the past. It will no longer be a tool with its own philosophy but a full-fledged participant in the financial market, regulated by the state. This directly contradicts the essence laid down in Bitcoin. Governments are trying to turn cryptocurrency into an investment tool and deny it as a means of payment. Although many payment methods are based on cryptocurrency and it is even accepted for payment on many websites, primarily in the legal sphere, it is considered a risky investment rather than real money. Regulation will bring certain safety but also the need to report and pay taxes for all participants in the crypto market. Whether to view this as a pro or a con is up to each individual, but this is the path most countries are taking today.
