The EU’s landmark Markets in Crypto Assets law, MiCA, takes effect next year, but it’s not clear how it will apply to foreign or decentralized issuers.
New European Union rules due to kick in a few months from now could mean largescale delisting of stablecoins, a Binance executive warned on Thursday, as lawyers attempt to decipher the implications of the bloc’s Markets in Crypto Assets (MiCA) regulation.
There are still gray areas in how the EU’s landmark law will apply to decentralized and foreign issuers, but officials from the European Banking Authority (EBA) have stressed there’s no grace period for coins already on the market.
MiCA was finalized last June, and is set to make the EU the first major jurisdiction in the world with a comprehensive crypto regulation, allowing exchanges and wallet providers to operate across the bloc with just a single license.
MiCA’s provisions on stablecoins – cryptoassets whose value is tied to other assets like fiat currency or gold – will take effect 12 months later in June 2024, and in the meantime the finer details are being consulted on by the EBA and its sister agency the European Securities and Markets Authority (ESMA).
“We are heading to a delisting of all stablecoins in Europe on June 30,” given that no project has yet been approved, Marina Parthuisot, Head of Legal at Binance France, told an online public hearing hosted by the EBA. “This could have a significant impact on the market in Europe compared to the rest of the world.”
Binance’s Chief Executive Officer Changpeng “CZ” Zhao has hailed the clear rules brought in by MiCA, but regulatory pressure has already forced the exchange to flee many European jurisdictions, including the Netherlands, Cyprus and Germany.
Yet they aren’t the only ones with issues. Others are scratching their heads over provisions requiring issuers to be EU-based undertakings, a wooly phrase that could rule out the innovative governance models favored by many blockchain foundations.
“A lot of the stablecoin issuers will be, or will purport to be, completely decentralized, therefore without any point of decision or issuance” and hence unable to meet MiCA strictures, Thomas Vogel, a partner at law firm Latham & Watkins, said. “This has become a sort of threshold question for a lot of the people we talk to, and as far as I can tell there is not much guidance.”
Ian O’Mara, a partner at Matheson law firm, told the hearing the rules could allow foreign issuers to register via a crypto provider based within the bloc – avoiding fragmentation of major international initiatives like Circle’s USDC.
“There are foreign firms who are seeking advice on their options here,” O’Mara told Cryptopurity, “I am skeptical the EBA/ESMA will facilitate this but arguably the legal text allows for this.”
Yet officials held out little hope they’ll show regulatory largesse in implementing the rules, whose main features are already set out in stone.
“There is no transitional arrangement for these types of [stablecoin] tokens. The rules will apply from the end of June next year,” Elizabeth Noble, Team Leader for MiCA at the EBA, told Parthuisot.
Meanwhile, her colleague Isabelle Vaillant, who is director of prudential regulation and supervisory policy at the EBA, described concerns over decentralization as “very practical, difficult questions,” but added that in reality there’d always be a contractual link between issuers and customers as a point of contact.