Europe's largest cryptocurrency regulation MiCA was approved this week

(The article was originally published on the previous version of the website on 25.4.2023)

The European Union has recently been focusing intensively on creating regulation for digital markets and platforms. One of the most recent regulations it has focused on is Mica (Market in Crypto - Assets), which is a single draft legal framework for cryptocurrencies and digital assets across the EU.

MiCa regulation aims to ensure safe and transparent markets for cryptocurrencies and digital assets, which are increasingly popular among investors. The regulation focuses on various areas such as cryptocurrency exchanges, digital wallets and cryptocurrency payments.

The main elements of regulation include the registration and licensing of cryptocurrency exchanges and digital wallets. These entities will have to comply with certain conditions and requirements in order to be registered and operate their services in the European Union. The regulation also sets out rules to protect customers and combat money laundering.

Another key element of the regulation is the obligation for digital asset issuers to comply with transparency and public information requirements. Publishers will have to publish information about their activities and provide regular reports on their activities and performance.

The Mica regulation has generated much discussion and debate, particularly in the cryptocurrency community. Some argue that regulation could create too much bureaucracy and limit innovation in cryptocurrencies and digital assets. Others, however, believe that regulation is necessary to ensure the security and credibility of the market.

Here are some of the main advantages and disadvantages of this regulation:

Benefits:

• Increased protection for investors: the MiCa regulation could help improve the security and credibility of the cryptocurrency market in Europe. Registration and licensing of cryptocurrency exchanges and digital wallets could ensure that these entities meet certain security and customer protection requirements.

• Greater transparency and information: Obliging issuers of digital assets to provide regular reports on their activities and performance could increase transparency and investor awareness of issuers' assets.

• Reducing the risk of money laundering: Mica regulation could help reduce the risk of money laundering and terrorist financing through cryptocurrencies. (Author's comment: the actual volume of these transactions is negligible compared to the banking system, so this argument by the regulator is irrelevant.)

Disadvantages:

• Too much red tape: the cryptocurrency community is of the opinion that Mica regulation will cause too much red tape and increased costs for cryptocurrency exchanges and digital wallets. This could lead to less innovation and limit the development of the cryptocurrency sector in Europe. (Author's comment: there will be a shift of these companies out of the European market to countries where regulation is more favourable.)

• Limiting anonymity: the Mica regulation aims to limit anonymity and privacy, which are often valued qualities in the cryptocurrency sector. For example, the obligation of cryptocurrency exchanges and digital wallets to share information about their customers could be perceived as a violation of privacy by users. (Author's comment: the problem with most DeFi projects is that it is not even technically possible for the developer to know the identity of clients (a client is just an address in a line of code))