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We are now in an exciting time facing the full application of MiCA [Regulation (EU) 2023/1114 on markets in crypto-assets]. The next years will reveal if MiCA is a success story – an intriguing question raised by analysts and academics in the EU and beyond.

MiCA provides a framework for offering to the public and admitting to trading different types of crypto-assets, together with requirements for crypto-asset service providers. It entered into force about a year and a half ago, on 29 June 2023, but its application followed a staggered approach. Two key parts of the regulation, those introducing rules on asset-referenced tokens and e-money tokens, have applied since 30 June 2024. Most of the remaining rules become applicable on 30 December 2024 (Level 1). Moreover, the staggered approach to the application of MiCA has been reflected in the gradual adoption of implementing measures (Level 2). The eventual implementation and enforcement of the new regime will be largely decentralised, with powers distributed among EU agencies (the European Securities and Markets Authority and the European Banking Authority) and competent authorities at the national level.

Industry stakeholders expect MiCA to constitute a framework that will provide more clarity, and perhaps more importantly more legal certainty. Other commentators are considering, among other things, whether the regulation will represent a competitive advantage for the EU over the US. Some claim that such a dynamic can already be observed, since a number of crypto firms appear to have already established their headquarters in the EU or relocated major operational units to Europe to benefit from a more favourable (that is, a clear and relatively predictable) regulatory environment.

MiCA, however, is a vast piece of legislation supported by an array of implementing measures stemming from the Level 1 and Level 2 regulations, all of which require compliance. So, while bigger (predominantly non-EU) players may be attracted by the new regime and view the EU as a safe harbour, deeming it advantageous to afford the MiCA compliance costs in order to benefit from greater legal certainty, smaller players might not be able to bear these costs. Such market entrants therefore risk being prevented from growing in (or entering) the European market despite their innovative potential.

Both the above aspirations for legal certainty and fears of excessive compliance costs reflect the fundamental question ahead of the full application of the new regime: will MiCA attract (global) players and enhance innovation in the EU?

The answer is unlikely to be straightforward, in large part due to a wide array of variables impacting the crypto sector beyond the regulatory domain, from political to economic factors. As far as the implementation of MiCA is concerned, the central importance of it being consistently enforced is beyond any doubt. With powers distributed between the EU agencies and national competent authorities, discipline in implementing the Level 1 and Level 2 rules and guidelines, alongside careful balancing of financial stability, investor protection and innovativeness in the EU crypto-asset market will play the key role in making MiCA a regulatory success story.

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