MiCA Implementation: Impact of New EU Regulation on Global Crypto Market

The European Parliament voted in favor of the cryptocurrency regulation bill MiCA last April, making the EU one of the first jurisdictions to introduce comprehensive regulations on crypto assets. Companies will have to comply with various requirements such as providing full disclosure to customers, establishing effective governance systems, and registering with the European Banking Authority (EBA), among others. Issuers of asset-related tokens (ART) and electronic money tokens (EMT) are required to disclose sustainability information, and crypto service providers must meet disclosure requirements by the end of the year. ART issuers not complying with MiCA legislation may face fines and be barred from operating in the European Union.

As a result of the MiCA legislation, some crypto firms have started to restrict the use of stablecoins. For example, Binance will limit certain services for European exchange clients, and the European company Lugh announced it would cease issuing its EURL stablecoin. The capitalization of a specific euro-backed stablecoin fell almost tenfold compared to its peak in 2022. While the volume of euro stablecoins in circulation is relatively small, analysts expect growth in this segment as European regulators pressure exchanges to withdraw dollar assets from circulation.

Lastly, the implementation of Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols is expected to increase operating costs for crypto companies, with potential impact on users. However, standardized international rules across the board are unlikely to be seen by users in the near future.

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