What impact will the upcoming implementation of the European MiCA legislation have on the market?

Original: Cryptonews

Compiled by: Yuliya, PANews

As 2025 approaches, the European cryptocurrency market is set to undergo significant changes. While global attention often focuses on developments in the U.S. market, the evolution of the European market in the coming year is also worthy of close attention. In particular, with the highly anticipated Markets in Crypto-Assets Regulation (MiCA) set to be fully implemented across the EU on December 30, 2024, the market landscape will experience notable shifts. The introduction of this regulation has already had a significant impact on the stablecoin market, especially with recent skepticism surrounding USDT. In response, Tether's CEO shared multiple clarifications on social media platform X, emphasizing that the reality is that USDT will not be deemed illegal in Europe.

Major Changes Ahead

Marina Markezic, co-founder of the European Crypto Initiative (EUCI), stated that the implementation of MiCA will encourage EU member states to compete to become the most attractive business and investment destinations. She noted:

"Jurisdictions that can efficiently adopt MiCA (the EU's Markets in Crypto-Assets Regulation) and provide a business-friendly environment are likely to become important cryptocurrency hubs, with Germany and France being strong contenders. At the same time, countries like Estonia, Malta, or Portugal may leverage their flexible regulatory processes and competitive tax policies to attract global participants."

Markezic explained that MiCA provides a unified regulatory framework, allowing businesses to operate across the trading area once they obtain regulatory approval in one member state through a "passport" system. EUCI anticipates that by 2025, Europe will have a "more mature and regulated cryptocurrency market," offering legal certainty and confidence to institutional and retail investors while promoting the adoption of blockchain technology.

"Due to the recent rise in the cryptocurrency market, retail participation has increased. The approval of ETFs and the change in the U.S. government have brought optimism to investors. Nevertheless, considering the historical volatility of the market, we believe that most retail cryptocurrency investors remain cautious."

Erald Ghoos, General Manager of OKX Europe, believes that 2025 will be a pivotal year for the transformation of the cryptocurrency industry, especially in Europe.

"The recent all-time high of Bitcoin is a strong indicator of the growing trust and attention towards digital assets. This surge, combined with the upcoming implementation of MiCA regulations in Europe, marks a critical moment for the industry, bringing a much-needed framework that is expected to provide greater clarity, security, and stability."

Challenges of MiCA

Although MiCA is seen as a step in the right direction, Marina Markezic from EUCI anticipates that the regulation may cause "considerable confusion" during its implementation. She pointed out that the 27 EU member states may interpret the regulations differently, leading to challenges in regulatory consistency.

"There is also significant uncertainty in determining which projects and assets fall under MiCA's regulatory scope, particularly regarding what can be considered 'fully decentralized.' Additionally, there is no consensus within the industry on the definition of NFTs, which creates ambiguity about whether certain tokens are subject to MiCA regulation."

Markezic emphasized that it is important for the new regulations to require projects to prepare a white paper before publicly issuing tokens, which may increase compliance difficulties for small projects and emerging initiatives, thereby stifling innovation. Furthermore, EUCI predicts that many tokens may be delisted from centralized platforms due to failure to meet regulatory standards. This change could reduce the variety of stablecoins available to retail investors on exchanges, affecting market liquidity and accessibility.

Additionally, she predicts that MiCA may accelerate the institutionalization and consolidation of the EU cryptocurrency market, driving mergers and acquisitions between traditional finance and crypto-native companies, while potentially leading to the exit of some companies or products from the market. Although MiCA largely excludes DeFi from direct regulation, its interfaces or service access points may face additional regulation from member states, which could lead to friction. (Read more)

Europe's Bitcoin Strategic Reserve

Recently, EU parliament member Sarah Knafo proposed establishing a Bitcoin strategic reserve in Brussels, suggesting that this move could emulate Trump's policies and warning that the launch of a digital euro might lead to a "dystopian world." Markezic stated that this idea is innovative but quite controversial in the EU's conservative financial environment. She believes that this proposal needs thorough discussion, focusing on its potential benefits and risks, particularly regarding the strategic importance of Bitcoin and other crypto assets, as well as the EU's positioning in global competition.

The MiCA regulation introduced by the EU was once seen as key to attracting crypto businesses, especially in the context of the U.S. Securities and Exchange Commission's regulatory enforcement. However, with Trump poised to return to the White House and promising a more lenient environment for the crypto industry, the EU's attractiveness may be affected.