Inside the EU’s ground-breaking law to regulate crypto-assets

The crash of TerraUSD , the world’s third-largest stablecoin, as well as the recent bankruptcy of the leading crypto exchange FTX  and of its 130 affiliated companies have served as reminders that finance cannot be unregulated and stable at the same time.

To prevent and avoid serious detriment to the financial and market stability and to prevent retail investors from blindly investing in the crypto space, a clear regulatory landscape is required.

The need to ensure an adequate protection to investors while preserving the market integrity and the stability of the financial system is at the heart of the rationale for the European proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets (the MiCA Proposal). It is envisaged that “the lack of an overall Union framework for crypto asset can lead to a lack of users’ confidence in those assets, which could significantly hinder the development of a market in those assets and can lead to missed opportunities in terms of innovative digital services, alternative payment instruments or new funding sources for Union companies”. 

At the time of writing this note, the publication of the final text of the MiCA Proposal in the Official Journal of the European Union is still pending (see below); however, it is foreseen that its adoption and implementation will mark the starting point of the first harmonised approach for the regulation of crypto-assets. The greater degree of legal certainty as well as the introduction of clear rules and protections for investors introduced by such dedicated and harmonised framework are also intended to reduce regulatory gaps or grey areas, thus attracting more institutional investment and growth. The aim is to “maintain competiveness of the Member States on international financial and technological markets and provide clients with significant benefits in terms of access to cheaper, faster and safer financial services and asset management”.

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