The final vote on the European Union's much-awaited set of crypto rules, known as the Markets in Crypto Assets (MiCA) regulation, was recently deferred to April 2023. The setback, however, was caused solely by technical difficulties and is still on its way to becoming the first comprehensive pan-European crypto framework in 2024. The question is whether MiCA, with its already existing imperfections, could qualify as a truly comprehensive framework a year from now.
MiCA's Effectiveness in Regulating the Crypto Industry Questioned
These questions have certainly appeared in the mind of the president of the European Central Bank, Christine Lagarde. In November 2022, amid the FTX scandal, she claimed that there would have to be a MiCA II, which embraces broader regulation and supervision. The EU DeFi regulations are still a way off, and the current draft generally needs to mention DeFi, which could become a problem when MiCA arrives.
The Future of DeFi Regulation in the EU
Cointelegraph reached out to various industry stakeholders for their opinions on whether the Markets in Crypto Assets regulation is still enough to enable the proper functioning of the European crypto market. Jeffrey Blockinger, general counsel at Quadrata, and Oliver Linch, CEO of Bittrex Global, believe that DeFi is inherently unregulatable and that MiCA won't make an exception. However, Terrance Yang, managing director at Swan Bitcoin, believes that DeFi is regulatable as it is transferable to the language of traditional finance.
EU's MiCA Fails to Address Lending and Staking
The EU framework also needs to address the growing crypto lending and staking sector, which is an issue for EU lawmakers. Ernest Lima, a partner at XReg Consulting, noted the problem of imbalance in the regulation of lending and staking in the European Union and the asymmetrical advantage in the crypto market's loose regulation. Another issue to watch is the regulation of nonfungible tokens (NFTs) in the EU.
The Future of EU Crypto Regulation Remains Uncertain
MiCA was largely met with moderate optimism by the crypto industry. With all the tumult in 2022, will the next iteration of the EU crypto framework be more restrictive or crypto-skeptical? Oliver Linch claims the necessity of tighter and swifter scrutiny over the market, while Ernest Lima anticipates a closer approach with more issues covered. The EU's bureaucratic machine should be considered, as it is still the EU, where at least one large legal document is scheduled to become a law.