For the European Union 2024 is de facto the first year that MiCA regulations are implemented. This process is long, and it may be compared with a train driving inside the tunnel. And now he's in the middle… On the one hand with the implementation of MiCA the European Union has the most sustainable regulatory system, which regulates cryptoassets in 27 European countries and this legislation is all harmonised on the whole EU territory. At the same time, MiCA creates new challenges for users and blockchain companies. Issue 1. Obstructing Access to Stablecoins An important element of MiCA is the compulsory licensing of stablecoins, which protects the rights of users and investors. The purpose here is to prevent the risk of stablecoins depeg, like in 2022 with UST. MiCA spells out the requirement for stablecoin reserves - 1:1. Moreover, stablecoin issues should keep from 30% up to 60% of these reserves on bank deposits. This requirement has unexpectedly created many problems for issuers of stablecoins who operate in the European Union and thus for users within the EU. Tether, issuer of USDT and EURT rejected to get license in the EU. Tether’s CEO, Paolo Ardoino this August has explained its position in interview to Cointelegraph amid the delisting of USDT from European exchanges and circulating rumors about the company's issues. Ardoino noted that MiCA requirements for stablecoins cause a "systemic risk”. He considered the EU requirement to hold up to 60% of stablecoin reserves in local banks dangerous, citing the bankruptcy of Silicon Valley Bank, which caused USDC to depeg, as an example of the risk involved. In the EU, this risk is amplified since banks only guarantee deposits of up to €100,000 - a ridiculously low figure for Tether's reserves. By the way, other issuers, such as Circle, also recognize the problems with regulating stablecoins in EU regarding reserve requirements. Almost four months have passed since Ardoino's interview, but the parties' positions have not changed. In the end, Tether announced that the EURt stablecoin will end exactly one year later - on 25 November 2025. However, Tether still will have some projects in the EU: stablecoins EURq and USDq issued by Dutch Company Quantoz Payments. If MiCA requirements led to the development of the European stablecoin market, making it more difficult for foreign issuers to access it, it would be understandable. However, the market for euro-linked stablecoins is in its infancy, as evidenced by their marketcap: EURS (124 mln), EURC (84 mln), EURCV (33 mln), EURt (36 mln). The total emission of the biggest EUR backed stablecoins is hundreds of times less than dollar pegged USDT (133 bln) and USDC (39 bln). Such a small circulating supply is clearly insufficient even for the European crypto market and exchanges, not to mention international settlements in EUR coins. If users are restricted in their ability to conduct transactions in dollar-denominated stablecoins, such as trading, and no popular euro-denominated stablecoins become available, their interests will suffer. In addition, this could force users to use USDT illegally and everyone would lose out. Stablecoins are just one example of the shortcomings of MiCA requirements, where I think European regulators should think about improving. But there are other areas as well. Issue 2: VASP Transition to CASPs Requirements for crypto entities in the EU are getting stricter under MiCA. Registered VASPs are obligated to get CASP (Crypto Asset Service Provider) license. Apart from the name change, this implies stricter licensing and auditing procedures - more restrictions and costs. CASPs license holders should establish a real presence in the jurisdiction, such as real director, AML officer, real office and some others. Not all of these requirements are yet known and understood, so how difficult they are for businesses will be known by mid-2025, when re-registration will be in full swing. The picture below shows how many months different EU countries give for this transition. Poland, Netherlands, and Lithuania gave companies only half a year. Probably such small terms for Poland and Lithuania are caused by too many operating crypto entities in these countries and the desire of the EU to introduce stricter control over VASP there. Probably the number of licenses in Lithuania and Poland will decrease significantly. And it is through these countries that many startups and blockchain companies operate and some of them may likely consider switching jurisdictions, especially if we are talking about startups that have been testing their business model in the EU to enter the US and Asian markets. ​​But it's not all bad, other popular jurisdictions for VASP registration have tried to give businesses more time to comply with the new requirements. France, Luxembourg, Malta, Estonia, Czech Republic and Cyprus (it is not in the table) have a long transition period for VASPs - 18-19 months. Issue 3: Stifle Innovations and Losing Leadership The European Union in recent years has been exactly the fintech sandbox, the field of innovation where international crypto companies could test their business models and services, due to liberal legislation and transparent game rules. Some critics fear that Europe will cease to be a global crypto hub after the introduction of MiCA. Whether these fears are justified or not is still being determined too. But indeed, growing regulatory requirements may encourage some startups to choose other markets to test their product. It all depends on the decisions of regulators - what will be the climate for business and convenience for ordinary users. While Europe is tightening regulation, some countries such as the US, on the contrary, are planning to liberalize their approach to crypto regulation. After the US Presidential Elections, the crypto market is booming for the whole of November. MiCA Benefits: Investor Protection and Transparency On the other hand let's talk about the advantages of MiCA is the protection of crypto investors' rights indeed in 2017 during ICO boom crypto companies abused EU facilities, registered in countries such as Estonia and were engaged in dubious operations. Total number of companies operating from Estonia was quite large (up to 4000). For this reason MiCA increasing compliance requirement looks justified to prevent such cases. This also applies to AML. Here MiCA introduces a clear travel rule. Crypto companies should report any transactions over 1000 euros. Although in the US this amount is $10,000, the MiCA requirements are indeed better from an anti-money laundering point of view. So by MiCA implementation, investors are given certain rights and cryptocurrency users can to get greater transparency from crypto businesses. Nevertheless, in this case the balance of interests of business and investors is important. And certainly in the case where regulation may look restrictive in that part. Operations in all EU jurisdictions MiCA aims to create a comprehensive regulatory framework for crypto-assets, significantly simplifying the licensing process for projects operating within the EU. Previously, acquiring the necessary licenses was a challenging task, as companies had to navigate a patchwork of complex rules across different member states. Under MiCA, the need for multiple licenses is greatly reduced, replaced by a single harmonized set of regulations. So does MiCA Really Need Improvement? It is worth considering there is a need for some changes or additions to MiCAR. I'm talking about, for instance, requirements for stablecoins - if popular issuers such as Tether will not be available to operate in Europe, ordinary crypto traders and investors will suffer, whose interests the regulators care so much about.  Yes, the interests of users should have been the top priority, but so that they are not taken care of as well as the fintech sector in the country. So regulators need to strike a balance, partly. This is already happening, for example, the vast majority of the European Union countries more than half of them gave a transitional period for VASPs of a year to adapt to the changes. Despite all MiCA issues, there is a chance that business and regulators will come to a realisation next year, that regulation needs to be improved. It may just take longer to reach agreement among all EU member states. At the local level, there have already been some advances: Romania exempted cryptocurrency proceeds from taxes in November. Nevertheless, the expressed fears may not be justified - it will not be possible to talk about how the MiCA has actually affected businesses and users of cryptocurrencies in the European Union until the end of 2025.  If you are interested in getting more crypto regulation insights, you can watch the global crypto regulation rating here and get updates on my X account. For the European Union 2024 is de facto the first year that MiCA regulations are implemented. This process is long, and it may be compared with a train driving inside the tunnel. And now he's in the middle… On the one hand with the implementation of MiCA the European Union has the most sustainable regulatory system, which regulates cryptoassets in 27 European countries and this legislation is all harmonised on the whole EU territory. At the same time, MiCA creates new challenges for users and blockchain companies. Issue 1. Obstructing Access to Stablecoins Issue 1. Obstructing Access to Stablecoins An important element of MiCA is the compulsory licensing of stablecoins, which protects the rights of users and investors. The purpose here is to prevent the risk of stablecoins depeg, like in 2022 with UST. MiCA spells out the requirement for stablecoin reserves - 1:1. Moreover, stablecoin issues should keep from 30% up to 60% of these reserves on bank deposits. This requirement has unexpectedly created many problems for issuers of stablecoins who operate in the European Union and thus for users within the EU. Tether, issuer of USDT and EURT rejected to get license in the EU. Tether’s CEO, Paolo Ardoino this August has explained its position in interview to Cointelegraph amid the delisting of USDT from European exchanges and circulating rumors about the company's issues. interview interview Ardoino noted that MiCA requirements for stablecoins cause a "systemic risk”. He considered the EU requirement to hold up to 60% of stablecoin reserves in local banks dangerous, citing the bankruptcy of Silicon Valley Bank, which caused USDC to depeg, as an example of the risk involved. In the EU, this risk is amplified since banks only guarantee deposits of up to €100,000 - a ridiculously low figure for Tether's reserves. By the way, other issuers, such as Circle, also recognize the problems with regulating stablecoins in EU regarding reserve requirements. Almost four months have passed since Ardoino's interview, but the parties' positions have not changed. In the end, Tether announced that the EURt stablecoin will end exactly one year later - on 25 November 2025. However, Tether still will have some projects in the EU: stablecoins EURq and USDq issued by Dutch Company Quantoz Payments. If MiCA requirements led to the development of the European stablecoin market, making it more difficult for foreign issuers to access it, it would be understandable. However, the market for euro-linked stablecoins is in its infancy, as evidenced by their marketcap: EURS (124 mln), EURC (84 mln), EURCV (33 mln), EURt (36 mln). The total emission of the biggest EUR backed stablecoins is hundreds of times less than dollar pegged USDT (133 bln) and USDC (39 bln). Such a small circulating supply is clearly insufficient even for the European crypto market and exchanges, not to mention international settlements in EUR coins. If users are restricted in their ability to conduct transactions in dollar-denominated stablecoins, such as trading, and no popular euro-denominated stablecoins become available, their interests will suffer. In addition, this could force users to use USDT illegally and everyone would lose out. Stablecoins are just one example of the shortcomings of MiCA requirements, where I think European regulators should think about improving. But there are other areas as well. Issue 2: VASP Transition to CASPs Requirements for crypto entities in the EU are getting stricter under MiCA. Registered VASPs are obligated to get CASP (Crypto Asset Service Provider) license. Apart from the name change, this implies stricter licensing and auditing procedures - more restrictions and costs. CASPs license holders should establish a real presence in the jurisdiction, such as real director, AML officer, real office and some others. Not all of these requirements are yet known and understood, so how difficult they are for businesses will be known by mid-2025, when re-registration will be in full swing. The picture below shows how many months different EU countries give for this transition. Poland, Netherlands, and Lithuania gave companies only half a year. Probably such small terms for Poland and Lithuania are caused by too many operating crypto entities in these countries and the desire of the EU to introduce stricter control over VASP there. Probably the number of licenses in Lithuania and Poland will decrease significantly. And it is through these countries that many startups and blockchain companies operate and some of them may likely consider switching jurisdictions, especially if we are talking about startups that have been testing their business model in the EU to enter the US and Asian markets. ​​But it's not all bad, other popular jurisdictions for VASP registration have tried to give businesses more time to comply with the new requirements. France, Luxembourg, Malta, Estonia, Czech Republic and Cyprus (it is not in the table) have a long transition period for VASPs - 18-19 months. Issue 3: Stifle Innovations and Losing Leadership The European Union in recent years has been exactly the fintech sandbox, the field of innovation where international crypto companies could test their business models and services, due to liberal legislation and transparent game rules. Some critics fear that Europe will cease to be a global crypto hub after the introduction of MiCA. Whether these fears are justified or not is still being determined too. But indeed, growing regulatory requirements may encourage some startups to choose other markets to test their product. It all depends on the decisions of regulators - what will be the climate for business and convenience for ordinary users. While Europe is tightening regulation, some countries such as the US, on the contrary, are planning to liberalize their approach to crypto regulation. After the US Presidential Elections, the crypto market is booming for the whole of November. MiCA Benefits: Investor Protection and Transparency On the other hand let's talk about the advantages of MiCA is the protection of crypto investors' rights indeed in 2017 during ICO boom crypto companies abused EU facilities, registered in countries such as Estonia and were engaged in dubious operations. Total number of companies operating from Estonia was quite large (up to 4000). For this reason MiCA increasing compliance requirement looks justified to prevent such cases. This also applies to AML. Here MiCA introduces a clear travel rule. Crypto companies should report any transactions over 1000 euros. Although in the US this amount is $10,000, the MiCA requirements are indeed better from an anti-money laundering point of view. So by MiCA implementation, investors are given certain rights and cryptocurrency users can to get greater transparency from crypto businesses. Nevertheless, in this case the balance of interests of business and investors is important. And certainly in the case where regulation may look restrictive in that part. Operations in all EU jurisdictions MiCA aims to create a comprehensive regulatory framework for crypto-assets, significantly simplifying the licensing process for projects operating within the EU. Previously, acquiring the necessary licenses was a challenging task, as companies had to navigate a patchwork of complex rules across different member states. Under MiCA, the need for multiple licenses is greatly reduced, replaced by a single harmonized set of regulations. So does MiCA Really Need Improvement? It is worth considering there is a need for some changes or additions to MiCAR. I'm talking about, for instance, requirements for stablecoins - if popular issuers such as Tether will not be available to operate in Europe, ordinary crypto traders and investors will suffer, whose interests the regulators care so much about.  Yes, the interests of users should have been the top priority, but so that they are not taken care of as well as the fintech sector in the country. So regulators need to strike a balance, partly. This is already happening, for example, the vast majority of the European Union countries more than half of them gave a transitional period for VASPs of a year to adapt to the changes. Despite all MiCA issues, there is a chance that business and regulators will come to a realisation next year, that regulation needs to be improved. It may just take longer to reach agreement among all EU member states. At the local level, there have already been some advances: Romania exempted cryptocurrency proceeds from taxes in November. Nevertheless, the expressed fears may not be justified - it will not be possible to talk about how the MiCA has actually affected businesses and users of cryptocurrencies in the European Union until the end of 2025.  If you are interested in getting more crypto regulation insights, you can watch the global crypto regulation rating here and get updates on my X account . here X account

The is an opinion piece based on the author’s POV and does not necessarily reflect the views of HackerNoon.

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