Expert Take: Fireblocks Legal Chief Explains DORA’s Positive Impact On Crypto Frameworks

For companies wishing to use tokenisation, it is important to consider current and future regulatory requirements and be prepared to adapt the technology to changing market conditions. MiCA promises clarity and certainty for all stakeholders, and this is why I expect to see increased adoption of crypto https://www.xcritical.com/ assets. As more individuals own crypto money, companies and banks will make it easier for them to use it to acquire products and services. On top of this, the rise of audited exchanges is also likely to have a positive impact on crypto usage by further building trust in the system. MiCA’s overarching objective is simple – to bolster protection of consumers and investors, facilitate financial stability, and provide a foundation from which crypto innovation and the use of crypto assets can grow sustainably.

Considerations for non-crypto firms

• MiCA is set to significantly influence institutional adoption and investment in the EU’s crypto market by clearing regulatory uncertainties that have so far deterred institutional involvement.
• With MiCA as a solid foundation, the European market will mature in the crypto industry.
• For investors, MiCA ensures greater protection by enforcing strict rules on transparency, cybersecurity, and consumer rights.
• Malta, France, and Liechtenstein are ahead of the curve, benefiting from existing legislative frameworks closely aligned with MiCA.
• This simplifies compliance and encourages cross-border operations, which digital assets are particularly well suited to.
• MICA’s framework can serve as a robust foundation for future innovation, guiding a stable and transparent market environment.

Short for the Markets in Crypto Assets regulation, MiCA is a framework of harmonised rules for crypto assets and provides legal certainty for those not covered by current EU financial services legislation. It is highly likely that MiCA will set a global standard for crypto regulations all over the world. mica regulation Therefore, MiCA might encourage other jurisdictions across the world to adopt similar frameworks, thus ensuring regulatory consistency, global standards in customer protection, and coordination between global financial markets. In short, MiCA is bringing a clear regulatory framework that could boost market confidence and stability. It’s also setting a high bar for small fintech startups due to those tough licensing and compliance rules. If they want to break into the EU market, they’ll have to figure out how to meet them.

How crypto companies are adapting to MiCA

To thrive in this landscape, the technology builders and designers must ensure Initial coin offering that their solutions align with the evolving regulatory standards. Tokenisation, as the process of converting assets into digital tokens, involves the creation of new opportunities for financing, asset management and transactions. MiCA requires token issuers to ensure transparency of operations, develop risk management policies and protect user data. Additionally, companies are required to consider GDPR provisions if their activities involve the processing of personal data, which imposes additional data protection obligations. In the long term, tokenisation has the potential to change traditional business and investment models, providing new opportunities for asset owners and investors. It promotes efficiency gains and cost savings, making it an important element of today’s digital economy.

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Competent authorities also have the power to impose penalties on issuers, offerors or persons seeking admission to trading and on CASPs. In addition to the offer and admission to trading of crypto-assets, MiCA provides for operational, organisational and prudential requirements at EU level applicable to crypto-asset service providers. ESMA (European Securities and Markets Authority) will prepare the guidelines to clarify the distinction between crypto assets regulated by MiCA and traditional financial instruments. Another type of digital asset the MiCA won’t cover are non-fungible tokens (NFTs), but the European Commission will look at these again in late 2024. Additionally, MiCA doesn’t cover lending and borrowing of crypto assets, nor does it apply to crypto assets that can’t be transferred from one holder to another.

As companies strive to adhere to MICA standards, they anticipate financial and operational adjustments. This proactive approach in addressing potential malpractices reduces risks, allowing consumers to engage with confidence, knowing they have robust safeguards. The Markets in Crypto-Assets Regulation, known as MiCA, heralds a new era for the cryptocurrency industry in Europe.

Circle’s compliance serves as an inspiring model for other crypto projects navigating the regulatory landscape. Circle’s proactive stance on MICA compliance underscores their commitment to regulatory excellence. This measure is designed to prevent market disruptions and protect investors by ensuring issuers maintain sufficient financial reserves. Policymakers must consider the conducive environment that minimal regulation has historically provided, ensuring MICA’s application does not dampen the creative spirit that propels the industry forward.

We offer long-term support, monitoring regulatory changes and helping you to adapt quickly to new requirements. Our goal is to ensure the sustainable development of your projects in the regulated landscape of the European Union. At Kyrrex, we believe that compliance isn’t just about survival — it’s about thriving in a regulated future. Only by achieving the regulation alignment, crypto businesses drive a more resilient, transparent, and innovative industry. Companies failing to meet the new standards risk losing access to the EU market or facing operational shutdowns. Smaller firms, in particular, may struggle with the financial and logistical demands of compliance, potentially driving a wave of market exits or consolidations.

Issuers must maintain sufficient reserves, implement buyback mechanisms, and comply with strict disclosure requirements. The complexity of MiCA’s legal requirements could limit competition within the market, particularly for smaller businesses and startups, which may struggle to comply with the extensive legal demands. Regulatory requirements create entry barriers that can disproportionately benefit larger companies with abundant resources, potentially leading to a less dynamic and competitive industry overall. The crypto industry has long been yearning for an all-encompassing regulatory framework to govern its activities and provide much-needed clarity. That wish has now been granted with landmark MiCA legislation, introduced by the European Union.

These compliance efforts will need to align with MiCA’s specific standards for financial stability, anti-money laundering (AML) protocols, and consumer protection . MiCA is set to address some of the biggest challenges facing the crypto industry in Europe. Before MiCA, the lack of clear regulations created an uncertain environment for both investors and businesses. With its introduction, MiCA provides a harmonized legal framework across all EU member states, which is particularly beneficial for companies operating in multiple countries. This unified approach removes legal discrepancies and allows crypto companies to scale across the EU more easily. Strong internal controls are a must, and the companies must meet certain capital requirements.

The essence of regulatory frameworks like MiCA will be a common ground that could help the EU crypto market grow stronger together, making it easier for businesses to operate across countries. When DORA was unveiled by the EU, there were concerns that it might stifle innovative growth in the digital assets space, especially since it covers not just regulated financial institutions but also virtual asset service providers (VASPs). MiCA offers an optional grandfathering period extending from 30 December 2024 to 1 July 2026, during which EU Member States can allow existing crypto asset service providers in their jurisdiction to continue operations. However, there’s concern from ESMA (European Securities and Markets Authority) regarding the potential extensive use of this option, especially in cases where current national rules are not as thorough as MiCA.

While these public blockchains do have their own embedded privacy features, there are concerns about whether these are as robust as the private blockchains being left behind. To summarise, it boils down to the use of private and public blockchains – the beating hearts of the crypto machine. “Even with prior awareness, the scale of what’s required is daunting for many,” he pointed out, highlighting the woes of many industry players who have been scrambling to meet the January 17 deadline for DORA compliance. There will be different impacts on each provider, but Allegrante noted that for those directly affected by DORA’s requirements, they need to undergo careful reevaluation of their internal systems and even third-party IT providers.

Under the MiCA crypto regulation, companies that provide crypto-asset services—including trading platforms, exchanges, and wallets—must secure authorisation to operate within the EU. This entails thorough vetting and adherence to stringent criteria set by regulatory authorities. All that doesn’t mean that MiCA treats non-regulated firms the same way as the regulated ones. The bulk of regulatory overload would still lie with entities having direct relationships with customers, i.e., token issuers and CASPs. However, a regulatory framework so vast as MiCA (which may be followed soon, in one way or another, in the US) would have reverberations that would be felt across the industry.

The targeted approach allows MiCA to focus on the specific crypto asset categories that require a harmonised regulatory framework while leaving the governance of other digital assets to existing or future specialised regulations. Establishing a clear regulatory framework for crypto-assets.Promoting innovation while managing risks.Ensuring consumer protection and financial stability. MiCA, short for Markets in Crypto-Assets Regulation, is a legislative framework introduced by the EU to regulate the cryptocurrency and blockchain ecosystem. Adopted in 2023, it aims to provide a unified approach to crypto regulation across all member states, fostering innovation while ensuring consumer protection and market stability. In what is arguably the biggest and most significant move to date, the European Union is also about to adopt MiCA.