In October, the European Union finalized the text of its landmark Markets in Crypto Assets (MiCA) regulatory framework – but not without a significant push from European Commissioner Mairead McGuinness, who is responsible for financial services, financial stability and the Capital Markets Union.
The sweeping rules that would apply to crypto service providers and digital asset issuers looking to operate in the 27 member states of the trade bloc were introduced in 2020 by the European Commission, the EU’s executive arm responsible for proposing new legislation. As the senior-most EU official for financial services, McGuinness deftly pushed the framework through the bloc’s complex legislative process before finalization. German lawmaker Stefan Berger saw the progression of the bill (procedurally and in terms of content) through the European Parliament.
“The EU is one of the first major jurisdictions worldwide to design a comprehensive regulatory framework for crypto-assets. MiCA will protect consumers, market integrity and financial stability. It will bring crypto-asset exchanges, wallet providers or issuers of crypto-assets under EU supervision,” the Commission said in an email to CoinDesk.
MiCA was originally inspired by the now-defunct Libra (later Diem) project by Facebook (now Meta) that sought to create a stablecoin – which is a digital currency stabilized against the value of other assets – that regulators feared could threaten nations’ sovereignty. But as it moved through the EU’s legislative process, the bill took on new life. It is now hailed as a standard-setting rulebook for crypto regulations on a global scale.
McGuinness called for a global agreement for regulating crypto with the aim of protecting investors earlier this year. In October, she called on the U.S. to create its own crypto rules.
She has also said she wants to ensure "no product remains unregulated." Although MiCA covers most crypto assets, it left some ambiguity on how to treat non-fungible tokens (NFT), something the Commission says it would address in follow-up regulation to MiCA should lawmakers request it.
When concerns arose about crypto being used to evade sanctions in the aftermath of Russia’s invasion of Ukraine, McGuinness urged EU lawmakers to speed up and finalize MiCA.
“What I want, and what I can tell you, [is] that MiCA rules will be the right tool to address the concerns on consumer protection, market integrity and financial stability. This is something that is so urgent given recent developments,” McGuinness said at the time.
The dramatic collapse of crypto exchange giant FTX in November has sent shockwaves through the entire industry, and regulators have mobilized with fresh vigor to clamp down on the space. Commenting on the crash, McGuinness said the notion that crypto can exist without regulation is “a science fiction idea.”
“Because money, if it's not regulated properly, as we know, can do horrible damage,” McGuinness said while speaking at a forum on Nov. 24.
The EU, thanks to MiCA, remains quite at ease in the wake of the FTX debacle, at least according to Berger, who says the strict standards set by the framework could have prevented such a collapse.
“If FTX had MiCA regulation, the present day would be completely different. So, for me, it's obvious the [MiCA rules work] as a bulwark against developments [that] led to this Lehman moment – and FTX was a Lehman moment – for the crypto world,” Berger said during a conference in November.
Berger, who steered the bill through attempts by lawmakers to add provisions that could have effectively banned energy-intensive crypto the bitcoin in the EU, was also instrumental in MiCA’s finalization this year.
Until the framework comes into effect in 2024, there’s really no saying how it would block such instances in practice, especially with companies like FTX that were set up in the Bahamas – well outside the EU’s jurisdiction.
EU lawmakers are set to vote on MiCA in February 2023.
