The crypto-sphere has been holding its breath over the past few days fearing for the existence of its future. Fortunately, the outcome of Monday’s vote on the MiCA law was favorable for EU companies. Crypto lawyer Biba Homsy shares his thoughts with us.
Why was the vote on the new MiCA law so crucial?
MiCA basically stands for regulation for Markets in Crypto-assets. Yesterday, was the official vote from the representatives of the European Parliament on this regulation.
The vote was crucial in the sense that this regulation will be applicable to all member states in the EU and will define the legal framework around crypto-assets. So the balance between providing a framework to protect the consumer while leaving a place for innovation was decisive.
What happened in the few days before this vote to wake up the whole crypto sphere?
Over the latest months, a number of proposals were made to change the original regulation of MiCA with more or fewer impacts on the businesses developed within the EU so far.
One of them had crystallised the debate where signals were done to the market that MiCA could potentially ban or restrict crypto-currencies based on the Proof-of-Work consensus protocols (such as the first two major cryptocurrencies: Bitcoin or Ether) due to their energy consumption. This would have had drastic consequences for most of the crypto companies and individuals using these crypto-assets within the EU.
During the weeks before, signals were provided to the market participants that such a ban would finally not be integrated within the MiCA proposal.
However, on Monday, the MEPs were to actually vote on it.
How do you perceive this new law? What exactly does it mean for European companies?
So far EU laws and regulations are already applicable, notably for crypto-assets that qualify as financial instruments or deposits.
But outside this scope, there are no specific rules at the EU level. Some Members States may have regulated but only at their own domestic level, which provides room for jurisdictions’ arbitrage, and uncertainty for a business model to develop in the several EU Member States at the same time.
This regulation – with more or less 160 pages – aims at providing a general framework, and sometimes even clarifies positions or competencies (such as ESMA and EBA) in the field of financial services. It will provide a uniform legal framework for crypto-assets in the EU.
However, now, negotiations are to begin with the EU Member States in order to shape final details.
How do regulators – such as the CSSF – adjust their circulars to make a financial center like Luxembourg an attractive place for companies operating in this market?
Regulation provides the same level playing field for all Member States. However, not everything will be covered in detail by the regulation. Practical application, knowledge, and experience in this field are key, and Luxembourg is building up all this through the key players in the field (private and public).
What do you think are the major trends to follow in the crypto market?
I would say outright the alliance between the metaverse and digital identity for everyone (whether through NFTs or simply specialised protocols for the management of one’s digital identity), as well as the mainstream development of crypto-assets where the bridges between traditional and decentralised finance must be found.