The European Union's crypto regulatory framework MiCA goes into full force, heralding significant changes for the industry. Major events like the ICO boom and the implosions of Terra and FTX have made it impossible for regulators and lawmakers to ignore the crypto industry, especially as its adoption continues to grow. Leading the charge in the effort to foster responsible innovation is the European Union, with its Markets in Crypto-Assets (MiCA) regulatory framework, which passed in April 2023 after nearly three years of development.While the implementation of the rules was phased, with rules targeting stablecoin issuers coming into force in June 2024, all parts of the framework have now entered into force since December 30, 2024. Here's what MiCA brings to the table and how it is reshaping the EU's crypto landscape.What is MiCA?The primary goal of MiCA is to ensure consumer protection in crypto while offering regulatory certainty for companies across the 27-member bloc. MiCA tries to achieve this by setting transparency and accountability standards for crypto asset issuers and crypto asset service providers (CASPs). The rules allow market participants to obtain licensing in one country and passport their services across the bloc.Key MiCA ProvisionsFor crypto asset issuers, the rules mean new disclosure requirements. Specifically, before introducing a new asset, issuers must draft a detailed whitepaper containing key details about its tokenomics, risks, and consensus mechanism.This whitepaper must be submitted to a national authority that does not have to explicitly approve the token launch but reserves the power to block it. At the same time, these issuers must also comply with marketing disclosures.Requirements for stablecoin issuers, however, go beyond these disclosure obligations. They must obtain electronic money institution (EMI) licenses, which impose significant Anti-Money Laundering (AML), Know-Your-Customer (KYC), and audit obligations.The law also imposes high stablecoin requirements regarding liquidity, redemption, and wind-down procedures and outlaws algorithmic stablecoins.For CASPs, MiCA means implementing robust KYC systems, establishing custody policies for the safekeeping of customer funds, and implementing robust market abuse detection and reporting systems.Beyond these, MiCA also places a de-facto ban on privacy coins.Which Companies are Affected by MiCA?MiCA impacts every crypto issuer or service provider operating within or offering services to EU residents. These include stablecoin providers like Circle and Tether, exchanges like Binance, Coinbase, and Kraken, and even custodians such as BitGo.Tether in FocusBy far, the major talking point to come out of MiCA's passing has been its implications for the EU's stablecoin landscape, especially as Tether, the largest stablecoin issuer, has not pursued a license in the bloc, unlike its biggest competitor, Circle.As a result, several crypto exchanges have moved to delist Tether USD (USDT) and Euro Tether (EURT) as part of efforts to obtain licensing in the region. While it is unclear whether Tether will reverse its decision in the future, MiCA's coming into force has likely contributed to the $2 billion decline in USDT's market cap over the past two days from nearly $139 billion to about $137 billion.Companies Still Have TimeEven though MiCA is now entirely in force, the law grants firms a window of grace to process licensing applications.For stablecoin issuers, this window was set at 12 months from the law's implementation, which gives companies until June 2025, as parts of the rules targeting stablecoins came into force in June 2024.For CASPs, this window was set at 18 months, giving firms till June 2026 to obtain licensing or cease operations in the EU.Meanwhile, even as firms race to comply with MiCA, regulators are already considering an update to cover DeFi and NFTs.
