Investors and traders have always demanded crypto regulation, as a proper legal framework would benefit anyone who wants to start saving with cryptocurrencies. However, creating a suitable criterion for assets other than stocks and bonds, which have only now been categorized as securities or commodities, is considerably complex.
Still, governments are trying to approach crypto to protect consumers. Whether they create learning programs to teach people the ideal way to purchase Bitcoin or invest in Ethereum, there are a few strategies and methods to introduce these new forms of financial money.
One of the latest moves towards this goal is Europe’s MiCa regulation, which was approved this year and created to provide more clearance for companies and overseas investors in 27 countries on the continent. The batch of rules came after the European Union’s rising concerns over financial challenges in the past years that might trigger further problems. Let’s see what they’re about.
What is MiCA, Actually?
MiCA comes from Markets in Crypto Assets, and it’s the first regulation of its kind to emphasize the importance of a crypto framework. The document has at least 150 pages that follow the regulation of securities trading and discuss how companies that employ crypto products and services have to seek authorization from one of Europe’s financial regulators after publishing a white paper.
The regulation consists of laws adapted for other assets, but it has been adapted for crypto payments and investments and addresses problems like market abuse and insider dealing.
MiCA has also considered stablecoins essentials, therefore dedicating a considerable part of the document to them. When linked to fiat currency, stablecoins are referred to as e-money tokens or asset-referenced tokens if they need to be governed. Among all regulations, the ones addressing stablecoins are the toughest since stablecoins that are not backed by EU currency can be banned.
The Ups And Downs Of This Crypto Regulation
MiCA might have come a little bit late to the party, but it’s a necessary guideline to provide legal certainty. The EU regulators worked on it for some time to tailor laws to fit cryptocurrencies and offer more credibility to customers. At the same time, regulators expect that employing MiCA will attract more investors.
However, crypto experts have found few vulnerabilities in the regulation, especially since it is tougher to meet as time passes. This means that companies will find it hard to abide by laws, so the market will be limited by ineffective bans. The EU will employ expensive fines for crypto businesses that pay their taxes wrong or have made several mistakes, which is a model that might not result in the desired outcome.
There’s also a lack of clarity on how overseas enforcements will operate because most crypto investments are made globally, as the market is open to any kind of worldwide transaction. Finally, the NFT area hasn’t been assessed correctly, meaning investors will struggle with regulation for a while.
Still, The Beginning Is Crucial
Starting to regulate cryptocurrencies is the first step towards acceptance and adoption, even if it’s not adequately employed. The crypto market is still young, with the first digital asset, Bitcoin, not even 20 years old. At the same time, the volatility of crypto and inclination for change have made the sector difficult for traditional institutions and governments to approach, but things are slowly changing.
We’ve seen important feedback from countries that have adopted Bitcoin as legal tender, such as El Salvador or the Central African Republic. Although they later gave up on the project, the results still offer valuable insights into how governments can introduce crypto within a country to help citizens and businesses.
Crypto As A Safe Alternative For The Population
Cryptocurrencies such as Bitcoin have long been leveraged in developing countries, where many citizens lack access to basic financial services. These countries include Morocco, Egypt, and the Philippines, which have the most unbanked populations.
Lately, various crypto startups and businesses have developed easier ways for people with no internet access or the possibility of buying a smartphone to use Bitcoin for buying, selling, or trading. Some of these technologies use SIM cards to transmit a customer’s wish to transact with Bitcoin, which helps people fight poverty.
At the same time, the use of cryptocurrencies can boost financial inclusion, allowing independent companies and collaborators to access capital and provide products and services to citizens. Blockchain, on the other hand, could nurture technology and modernization.
However, Crypto Can Be Tricky To Control
The cryptocurrency sector has been controversial for a long time, as people are still trying to figure out its use. The lack of regulation, education and acceptance, has created a bad image of this industry since it’s not protected by governments and has been leveraged for illicit activities, such as ransomware or money laundering.
The FTX case truly made crypto untrustworthy to the general population. The company claimed to have gone bankrupt while misusing customer funds. The collapse of the exchange, which was one of the biggest and most important at the moment, led to many investors fleeing from the sector and relying on regular assets instead, as many users lost all their money from the exchange.
There have been a few crypto scams throughout Bitcoin’s history, and they’re getting better by the day. Therefore, investors must be careful with how they use their cryptocurrencies and what exchanges they choose because there is no backup in case something unfortunate happens.
Hence, it’s good that regulation is imposed, despite its cracks and vulnerabilities, because it shows development and progress towards the adoption of cryptocurrencies. At the same time, a proper framework might provide more safety for investors.
Final Considerations
As we move towards innovation in the crypto sector, the European Union is introducing new guidelines for digital assets called Market in Crypto Assets (MiCA), through which governments aim to help investors protect their assets and eliminate the possibility of fraud to happen. Much of the document assesses stablecoins, and exchanges and any other crypto companies must abide by the laws to continue their operations.