CoinDesk Report:
Author: Dante Disparte
Source: coindesk
Translator: ChatGPT
On Sunday, the European Union’s landmark comprehensive digital asset regulatory law will come into effect. With the Crypto Assets Market Regulation Framework, Europe has achieved what other jurisdictions, including the United States, have been avoiding:
not just providing legal and regulatory clarity for a part of the digital asset market, but for the entire market.
Driven by the entry of large tech firms (such as Meta’s Diem, formerly Libra, initiative) into financial markets, or out of concerns over unregulated cryptocurrencies, Europe’s policy development over the past five years has been highly coordinated. MiCA will have profound implications, permanently linking digital assets with the real economy, and doing so in a typically European manner.
The Decade of Crypto
In the first decade since the birth of cryptocurrencies, the industry’s hallmark has been staggering cycles of boom and bust, making it a uniquely American market in many respects. Thus, the dollar serves not only as a pricing benchmark for digital assets (benefiting from the steady growth of stablecoins, which now hold a value exceeding $150 billion),
but also as a reserve currency in internet finance, much like its role in the physical world. MiCA aims to address this by offering a pathway to success for euro-denominated stablecoins and access to a robust consumer market of 441 million.
Under the EU’s new rules, stablecoins will be classified as electronic money tokens. While some aspects of MiCA are inherently protective, aiming to shield European consumers and investors from fraud and risks posed by the rapidly evolving crypto market, it also involves a degree of economic and technological sovereignty. Most notably,
offshore stablecoins (termed globally stablecoins) are not permitted under MiCA. Stablecoins pegged to other currencies must primarily comply with European electronic money licensing requirements,
which entail adherence to prudential, anti-financial crime, and other rules. If stablecoin issuers offer other crypto asset services, they must obtain a second license—such as Digital Asset Service Provider (DASP), Virtual Asset Service Provider (VASP), or Crypto Asset Service Provider (CASP)—depending on the jurisdiction. This requirement sets a foundational compliance standard for digital asset custody. The days of amorphous crypto firms without substantive presence in the EU are gone for good.
Indeed, MiCA is not only about consumer and market protection but also about job creation and economic competitiveness. Licensed entities must possess responsible “minds and management” within EU jurisdictional borders before they can operate pan-European under coordinated federal oversight—though national regulators still have some way to go to ensure MiCA’s smooth implementation across the single market.
Crypto and Banking
For the crypto industry and its interconnectedness with banking, MiCA signifies profound changes that only the most serious participants will be prepared for. For instance,
in the category of revived stablecoins pegged to the dollar, MiCA marks a well-known fiscal cliff where unregulated or non-compliant tokens will eventually be delisted or face severe restrictions on crypto exchanges.
The reason is straightforward.
MiCA does not view stablecoins as fringe financial products or mere poker chips in the crypto casino but rather aligns them with long-standing electronic money rules.
Thus, all stablecoins offered by EU crypto exchanges must comply with the rules of electronic money tokens. This empowers token holders with the right to redeem the underlying currency directly from the issuer at face value, enhancing collective accountability and consumer protection across the interconnected digital asset value chain—from wallets to exchanges, and ultimately to issuers. This model sharply contrasts with amorphous standards or lack of prudential safeguards that led to the run on nominally stable currencies like Terra Luna. If Terra Luna adhered to equivalent US electronic money regulations, such as state money transmission laws, consumers would be better protected from crises.
Under the current EU framework, all regulated stablecoins will now share a common regulatory foundation, which will not only encourage competition but ultimately lead to broader substitutability and interoperability in the EU market. Like all new rules or comprehensive regulations, MiCA is not perfect and in some areas overly prescriptive, prompting EU policymakers to contemplate MiCA 2.0, which may address gaps in areas like non-fungible tokens (NFTs), decentralized finance, and others. While MiCA now provides clear rules for European crypto market participants, on the Atlantic side, imperfect rules or lack of federal oversight allow an industry to flourish. Should the transatlantic tech divide widen? Or should the US and key EU partners aspire to share digital public resources?
If US policymakers adopt a competitive stance towards the EU in digital assets, North America could consider a true “North American Digital Assets Free Trade Agreement.” However, a lasting alternative could be to forge a Western Digital Assets Alliance spanning continents, anchoring democratic values in these emerging markets and letting exponential technologies shape the future.
With MiCA now in place, it’s time for the US to act and reaffirm its global leadership in financial services regulation and innovation
