The EU is still working out how it would like to see the crypto market regulated. This is very exciting because at the same time we can observe how the UK is potentially handling certain things differently. It will take years until MiCA comes into full effect. Some of the decisions are causing controversy in the public while others are cheered because finally, regulation seems to make sense.
What is the latest decision and why is it a good idea despite criticism from certain spectators?
Let’s close all loopholes
One major concern is that cryptocurrencies could be used for unwanted activities. While data clearly shows that the vast majority of transactions are not affiliated with any kind of suspicious activity, some politicians still held a skeptical stance on this issue.
The reason is simple, if a malicious actor would split transactions and his holdings onto several wallets, he might end up below a threshold and would pass through all checks that are in place by transferring many tiny amounts. What the EU did with the latest decision is to close this loophole and allow no thresholds. All parties need to be identified and if the amount of a transaction exceeded 1.000€, the service provider involved has to check if the wallet really belongs to his customer.
This rule will only apply when interacting with a centralized service provider such as a broker or a crypto exchange. All peer-to-peer transactions between citizens from unhosted wallets don’t need to comply with this rule.
Why is this a good thing?
Generally speaking, MiCA will give businesses and consumers more clarity. Each member state of the EU already has to take measures to fulfill the criteria of the FATF and the so-called travel rule. The problem is that each country took its own approach. But cryptocurrencies and affiliated businesses operate internationally and therefore a single set of rules is necessary for all market participants because it makes it easier to operate and trade.
With MiCA the EU finally gets this one standard that will make things easier and safer. That being said, most critics of the recent decision believe that it is bad to check on all those wallets. The thing is, banks already have all of their customer’s data while service providers in the crypto industry already have to identify their customers. At the end of the day, there is no news in regards to certain aspects of consumer protection.
It is also important to understand that all of this is meant to prevent bad things to happen. With the new regulation in place, trading and interacting with cryptocurrencies will become safer and easier throughout the whole EU.