MiCA, How Might Regulation and Regulators Shape The Landscape

MiCA, How Might Regulation and Regulators Shape The Landscape: A CEO's Perspective

By Marc Taverner, XEROF CEO & Co-Founder

Let's talk about MiCA, shall we? It's a classic case of missing the forest for the trees. I believe that the European Parliament and Regulators got so obsessed about the 'threat' of stablecoins, particularly the perceived threat to their future aspirations for a 'digital euro', that they completely missed the real opportunity of blockchain technologies and the generational opportunity to create a global centre for innovation in the EEA. Imagine a scene where community members are so busy, furiously building fences, that they forget to water their crops. That's the image that haunts me about MiCA.

Now, don't misunderstand me—MiCA isn't all bad. It's forcing the market participants, especially young start-ups, to mature rapidly, a valuable and worthwhile exercise. However, it demands a high level of investment in compliance and administration from even the most early-stage participants. That's generally a good thing, right? Well, probably. But at what cost? Instead of bringing regularity clarity, my experience is that MiCA has brought a near-term fog of confusion, uncertainty, and cost. It's been a welcome product line for professional service firms and probably an enjoyable distraction for civil servants invited to speaker stages and industry events.

But what if you're a young start-up pouring capital you don't have into professional advisory services that guide you to, at best, "just wait and see" or, at worst, "Come pay & register now and gain access to passporting across 30 countries" (which is not true)? It's madness! In April 2023, MiCA passed to great fanfare, but it uses a playbook from the PTT era when fax machines and telegrams were cutting-edge techs. It's all rear-view driving.

Now, let's look at France for a second. Their PACTE law from 2019? That's more like it. PACTE provided strong support for blockchain innovation and even went so far as to support crypto firms trying to secure banking access if they could prove they adhered to the suggested frameworks. PACTE grabbed my attention as it addresses one of the biggest headaches in the web3 space – the constant fear of having your bank account frozen or revoked for no reason. It's exactly why we built XEROF, by the way – to help our fellow innovators deal with this nonsense.

Over a few months, various blockchain associations asked numerous MiCA committees to consider this and other pro-innovation approaches, but each time, they refused. I believe they caved into the tradfi lobby. It's frustrating, but it's history. Looking forward positively, MiCA can serve as a first draft for other regions to iterate and drastically improve. I'm itching to see if the UK wakes up and takes action once the distraction of the new government's first budget passes at the end of October. Their last attempt at crypto support was about as successful as a chocolate teapot, leaving numerous applicants wondering if their submissions had fallen into a black hole of email silence and sunk legal and advisory investments. Now that the UK is free of European administration, is there a willingness to position the UK as the global centre for blockchain innovation? The geographical location and the financial and trading history of the City of London suggest it's possible. Still, we all know that past performance is not an indicator of future results.

And the US? Post-election, we all hope that they can get their act together. Will they create consensus between polarised political parties and generate accepted 'best practices' between disparate states, some of which have seized the opportunity and created local frameworks to support segments of Web3, such as miners, exchanges, and derivatives providers? Or will it be free for all, with certain states continuing to do their own thing, seemingly in contradiction to federal positions all capped by an SEC appearing to act as lawmaker and enforcer rolled into one?

I'm sure that regulations and Regulators will have a profound and long-lasting effect on the global market. As an example, I use the much-maligned and successful stablecoin, USDT. According to Coinmarketcap (Oct 8 2024), the market cap of USDT is around $120bn. That's 2.6 times larger than the next four stablecoins of USDC, DAI, FDUSD and USDD combined. Due to MiCA, Coinbase recently announced its plans to delist USDT and other 'non-MiCA compliant' stablecoins by Dec 30 2024. This could create a massive shift in the EEA stablecoin market. With their already acquired European EMI licenses, it could represent a golden opportunity for some, such as USDC and EURC.

So, I believe that regulations and Regulators can impact and influence the market and who the market winners might be.

Libra anyone?

I'll be debating this at Zebu Live in London this Friday. We'll discuss how the EU, UK, and US are reshaping the crypto landscape and what this means for all of us trying to innovate in this space.

Trust me, it's going to be a lively discussion. See you there?

Marc Taverner - XEROF CEO & Co-Founder