Lawmakers in the European Union on Thursday voted in favor of a new crypto licensing regime, MiCA. The vote clears the way for the new regulation of the crypto industry to take effect in mid 2024. It will make the EU the first major jurisdiction in the world to introduce a crypto law package.

There was a time when the general attitude of the crypto community toward this EU crypto regulation package was critical. That has changed considerably since the train wreck in slow motion that has been regulation in the United States. Namely, no clear regulation but filing lawsuits left and right, effectively choking the industry.  

At least the EU will have regulation, even if people aren't happy with all points!

MiCA deals mainly with crypto companies

MiCA mainly deals with crypto exchanges and other companies that have to do with crypto, such as issuers of stablecoins. The main purposes of MiCA are:

• A set of clear rules: making it easier for business to use cryptocurrencies across borders, without needing 27 different licenses.
• Protection: MiCA purportedly will help protect people from scams and other risks by introducing rules for companies that issue and manage these digital assets.
• Fair markets: MiCA should prevent unfair practices like market manipulation and insider trading.
• Financial stability: MiCA makes sure companies that issue stablecoins have enough reserves and follow proper risk management practices. 

While MiCA regulates Bitcoin, Ether, other coins, stablecoins in different asset categories, one thing that it isn't clearly regulated are NFT's. At the time when the laws were drafted, NFT's weren't really a thing...

Controversies 

Around the time that the laws were drafted in 2022, there were controversial topics such as a potential EU ban on Bitcoin mining. This was fortunately removed from the text. 

Another hotly debated issue that is often confused with MiCA was surrounding so-called "unhosted wallets," part of the 'travel rule' (TFR) regulations. These fall outside the scope of MiCA though. TFR rules are about crypto exchanges being required to collect data from the owners of crypto wallets, for anti-money laundering purposes. 

Conclusion: catalyst for EU crypto industry

MiCA could create possibilities for the EU crypto industry to take a leading role. For EU crypto companies such as LiteBit, MiCA is a game changer. They won't have to knock at every single national regulator’s door if they want to serve the market. That is currently the case, and hardly an ideal situation, considering that crypto companies operate internationally.  

Another benefit of MiCA is that, in all likelihood, it will lead to more institutional adoption and activity in the EU crypto market. Currently, only 4% of institutional funds in the EU have exposure to crypto assets. For EU banks, the threshold to offer for example custody of crypto assets will be lower.