This September the European Commission (EC) adopted a new , including a digital finance strategy and legislative proposals on crypto-assets and digital resilience. Digital Finance Package This legal framework has a proposal regarding cryptocurrencies: Markets in Crypto-assets (MiCA), which gives definition to cryptocurrencies, stable coins. Some experts are worried that MiCA will regulate crypto space as strictly as financial services and will threaten the existence of different cryptocurrency instruments like DeFis in the EU market. MiCA aims to provide a single licensing regime for crypto projects across all the EU member states by 2024. I have asked the opinion on the MiCA draft and how it will affect the crypto landscape in Europe from the businesses who already are compliant to existing regulation for financial services and have licenses for crypto activities. Here you can read the opinions on upcoming EU crypto regulations from VK, founder of Estonian crypto exchange and Tobias Hermansen, Corporate Counsel (Coinify even consulted EuroCommission regarding upcoming regulations). STEX Coinify - It has now become obvious that the cryptocurrency market is going to become fully regulated in Europe. Are we jumping to the future or sliding backwards to the Medieval Era of Finance like a lot of people say? Well, this is interesting. While the regulation is new and revolutionary a large part of the proposed regime is based on already existing rules from markets in financial instruments and prospectus regulation. TH: The regulation includes articles on licensing, supervision, market-abuse, insider trading, publication of white paper and more. I believe that this proposed regime will legitimize the cryptocurrency industry. A number of actors, including ourselves, have already been applying many of the current financial regulatory standards to their business, but without a public and approved framework it is difficult to move away from the predetermined attitudes towards cryptocurrency. Furthermore, the regulation shows great knowledge of the different business models within the industry and many of the rules have been amended and customized to fit cryptocurrency transactions and services. We are aware that some rules are not feasible for the industry, but the commission is actively seeking inputs from the cryptocurrency market, and will amend the proposed regulation in order to provide the best regulatory framework. At Coinify we are excited about this new proposed regulation and believe that it will help move cryptocurrency towards a mainstream adoption. I’ll be the optimist here. As a society, that is now eager to accept innovative payment methods not only as a phenomenon, but also creating a legal field for them is jumping to the future for sure. VK: That is exactly why STEX was amongst the first to comply and support all the regulatory innovations in Estonia in 2020. Speaking of the Medieval Era: current situation with fiat flow of funds aka traditional finance definitely reminds me of the times when people had to physically attend a shop or a farm to buy gear, food or other necessities. Money was supposed to make it easier for people to get what they needed or get rid of what they have plenty of. So what is the actual difference between a two-day horse ride to the nearest town and waiting for bank transfer to arrive for the same two days for the customer? In my opinion - there’s none. - There’s a lot of tempting offers among non-regulated services in crypto assets like margin trading, crypto derivatives. What is their actual current impact on the market? What shall we miss without them? Well, we’ll miss tons of scam exits, fake liquidations and tears. Which seems like a positive loss to me. Let’s say you own an asset that became toxic. The earlier you get rid of it - the better your portfolio will perform further. VK: The impact of non-regulated businesses with zero KYC, KYB and KYT on the cryptocurrency market is huge. And there are two reasons for that: evident simplicity of onboarding and their presentation of making profits with them as something common and easy. In fact the only easy going thing is losing all of your money with them. It is obvious that there’s a lot of work ahead to protect customers from irresponsible service offerings. But the longest route always starts with the first step and we definitely should be greeting that step. Innovation should rarely be limited and if there’s a market for a product it should be sustained. While this is the case, it is also important to remember why the regulation has been put in place. TH: This is usually to protect investors and consumers by having standards and limitations, such as necessary knowledge of the investment product. I believe that the market as a whole will benefit from requiring all players in the cryptocurrency industry to be regulated. By doing so, we make sure that serious businesses stay in the european market and more illegitimate businesses are forced out. - The governments of each Member State are supposed to harmonize their laws with MiCA with no assurance the pandemic will step down. Do you foresee any issues with implementation of the new regulations? Both yes and no. The EU published the anti-money laundering rules as a directive, which had to be implemented by each individual member state. We see that some member states are yet to implement this, which creates a fractioned European regime. TH: It seems that they have learned from this and MiCA is proposed as a regulation, which means that no member state will have to implement the rules into their national laws. This will make sure that there is high regulatory certainty around MiCA in the whole European Union. While this is the case for the legal implementation of MiCA, there will still be some administrative implementations such as setting up a national framework for applying for licences, supervising and monitoring of the cryptocurrency businesses. There might be some issues where foreign service providers wish to establish themselves in the EU, and they choose member states with faster processes. I do not believe this affects the cryptocurrency industry as a whole so in this regard, I do not see any large issues. There’s one simple thought I need to make explicit: MiCA Regulation is The Foundation for crypto-based neo-banking. A new banking and financial system that wouldn’t be an offshore leveraged anarchy. VK: Instead, this ecosystem will have “normal”... I’d even say decent businesses and practices. For all the market participants this means an open door to big finance, including institutional. So you have quite a simple choice: stay in shady offshore or become regulated and recognized with a free path to complete and massive crypto adoption to any industry in every part of a civilized world. For STEX the answer is obvious - we stay regulated. With full respect to our competitors' decision, if they act contrary, we’ll gladly take care of their conscious customers who will prefer to stay protected.

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