For Luxembourg’s crypto community, Thursday’s adoption of the MiCA regulation in the European Parliament reassures established financial players and offers an EU passportable licensing regime with no need for national transposition in member states. “It enables new ways of issuance and distribution of new types of assets,” said ABBL.
The eyes of the crypto world this week were on Strasbourg as the European Parliament voted (517 to 38, 18 abstentions) to support the EU Markets in Crypto-Assets regulation, known as MiCA. The adoption makes the EU the world’s first major political region to develop such a policy. It is viewed as a response to high-profile crypto business failures such the FTX crypto exchange.
During a lengthy debate on Wednesday, many MEPs welcomed the new regulation, with opposition coming only from the
political margins. MiCA, said Green MEP Ernest Urtasun, is part of a package of EU legislation that “mark the end of the Wild West era for the unregulated world of crypto-assets.”
‘Vital’ milestone
Soon after the vote, MEP Stefan Berger, the christian-democrat who is rapporteur for the legislative process, tweeted out his happiness over the vote: “We have MiCA!. The EU Parliament has accepted regulation. A milestone for the Crypto asset industry. Thanks to all colleagues and also for all the support of the community here!”
“No one I think in this house questions why these rules are absolutely vital for the financial system,” said Mairead McGuinness, the European Commission’s commissioner for financial services, financial stability and capital markets union.
“As we’ve seen in recent months, stringent rules and supervision are very much needed. Because we’ve had the collapse of projects such as FTX, Terra Luna, Celsius and Voyager. We’ve seen many retail investors lured in by false promises or false hopes, losing huge amounts of money. And while the crypto market may be too small to trigger systemic risks, we do know that there are increasing links between crypto markets and traditional financial services.”
Opportunity for Europe
Some saw regulating the crypto market as offering an opportunity to Europe. “Europe missed the innovation train when it came to the internet, and was not able to harness it when it came to platforms,” said Lídia Pereira, social democrat MEP. “It is not sufficient now to just catch the train. We have to be the drivers of this new era and lead on these financial technologies.”
Members of Luxembourg’s tight-knit crypto community were strong supporters.
“ABBL welcomes the EU Regulation on Markets in Crypto-assets (MiCA) and is confident it will have a positive impact on Luxembourg and its crypto-assets sector,” wrote ABBL crypto specialists Ananda Kautz and Andrey Martovoy.
New ways of issuance
The ABBL team said that “MiCA taken alone is not likely to disrupt or make disappear current business models in banking and finance, but rather it enables new ways of issuance and distribution of new types of assets, as well as the provision of all related services, under a regulated framework also taking into account investor protection and sustainability aspects.”
The passage of MiCA is “good news” for Luxembourg, said Nadia Manzari, a partner with the Schiltz and Schiltz law firm. Earlier in her career, Manzari worked in the CSSF financial regulator’s innovation, payment, market infrastructure and governance department and was instrumental in opening the way for crypto in Luxembourg.
“It’s going to confirm for institutionalised actors like banks that they can now go into that space without running excessive risks,” she said. “I think it’s going to confirm the provision of crypto asset services to consumers or to professional investors from the bank side.”
Upgrading license
Companies in Luxembourg who are registered as virtual asset service providers will be able, after obtaining a license under MiCA, to provide their services across the EU, she pointed out.
The new EU-wide regulation might also change who applies for such licenses. “There will be more of a tendency for not only crypto asset service licenses, but more for investment firms who would like to apply, or for providers who would like to apply for both types of services, be it traditional financial investment services and crypto asset services,” she said, adding that this could favour the development of the investment services industry.
Better late than never
Industry experts speaking to Investment Officer Luxembourg emphasised the late arrival of MiCA. The ABBL team pointed out that the European Commission released the MiCA proposal on 24 September 2020. “So the bill was introduced 11 years later than the emergence of Bitcoin in 2009,” noted Kautz and Martovoy.
“Over this period, there were several ups and downs in the crypto-asset market, launches of multiple crypto- and DLT-based initiatives, including global stablecoins by market players and crypto-asset exchange crashes and hacks in the unregulated context when there was the lack of or absence of transparency, stability and investor protection. From this point of view, MiCA comes late indeed.”
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