It is threatening to have one of the biggest assets in the world be left unregulated. Having said that, it is true that any amount of regulation would label cryptocurrencies under the "centralized" territory, and it can be extremely difficult for the entire space to agree on how much centralization is acceptable to maintain crypto's decentralized nature. Amid this conundrum, the [European Commission proposed ](https://www.europarl.europa.eu/news/en/press-room/20230414IPR80133/crypto-assets-green-light-to-new-rules-for-tracing-transfers-in-the-eu)the European MiCA (Markets in crypto assets) in 2020. In April 2023, the European Parliament adopted European MiCA regulation. Let’s go into further detail. 

## What is MiCA (Markets in Crypto Assets)? 

To understand MiCA, we must first distinguish between some of the asset classes within the crypto spectrum. MiCA defines a crypto asset as a digital portrayal of value or "rights" that can be traded using [DLT ](https://allesovercrypto.nl/blog/distributed-ledger-technology-dlt)(Distributive Ledger Technology). MiCA regulation also differentiates between conventional cryptocurrency and derived "tokens". 

MiCA crypto, as the name suggests, is a name given to categorize the markets within the [crypto space](/news/article/marscoin-project-2023). This distinction is necessary as it helps regulatory bodies understand what sort of regulations suit what kind of asset classes. The European MiCA regulation is an attempt to jumpstart the initiative of regulating a high-demand asset class to bring more of it under the umbrella of control and scrutiny. 

Although the MiCA crypto regulation is only a step towards regulating a massively valued industry, the European Commission thinks it will serve as a stepping stone towards greater and better-directed regulation in the future. The European Commission believes so because the European MiCA Regulation is the first regulatory body of its kind. 

Even though the European Union has always believed in the utility of crypto assets, it was sceptical of the legal frameworks in and around the technology. The rampant security failures that kept popping up within crypto only reinforced the EU's stance on crypto. To understand the potential impact of the MiCA regulation, read up [on our site](/news/article/euroc). 

The European MiCA Regulation provides the bedrock upon which a crypto ecosystem can be built, with sustainability and scrutiny in mind. This regulation could effectively allow the industry to grow at the rate at which enthusiasts have always wished while at the same time ensuring that there are safeguards in place. Countries like Japan [are following suit](/news/article/japanese-crypto-regulation-call-made) in the regulatory space. 

## How does MiCA crypto regulation work? 

The MiCA regulation extends to three major crypto asset classes: 1) Asset-Referenced Tokens (ARTs), 2) Electronic Money Tokens (EMTs), and 3) Crypto Assets that are neither ARTs nor EMTs. 

ARTs are crypto assets backed by [legal tender](https://www.law.cornell.edu/wex/legal_tender#:~:text=Legal%20Tender%20refers%20to%20all,or%20services%20that%20were%20rendered.) or a combination of real assets. These can be fiat currencies, the gold standard, or commodities. This domain pretty much includes almost all assets that are not EMTs. As a result, these crypto assets are relatively more secure and stable, and one could argue that they are susceptible to a degree of centralization. 

Conversely, EMTs may also be backed by legal tender, but at most, for one fiat currency only. This is the biggest difference between ARTs and EMTs. ARTs diversify risk by depending on a basket of commodities/assets, whereas EMTs rely on single asset classes, behaving more like electronic tokens. 

Lastly, the MiCA regulation also extends to utility crypto tokens. These include all derived tokens for Metaverses, blockchains, etc., with their own local exchange tokens. These differ from the electronic security tokens, as is also reflected by the fact that they do not come under the securities' framework in most countries. 

It is essential to note that the MiCA regulation does not provide for NFTs or other DeFi elements. This is mainly because these DeFi assets, by nature, are decentralized and go through their own regulatory protocols. Passing these assets through a centralized regulatory framework would pretty much take away their main point of differentiation. 

## Authority 

The European MiCA crypto regulation distinguishes between crypto asset Issuers and [crypto Asset Service Providers](https://www.esma.europa.eu/qa-topics/crypto-asset-service-provider-casp#:~:text=Crypto-Asset%20Service%20Provider%20(CASP,European%20Securities%20and%20Markets%20Authority&text=Is%20a%20DLT%20MI%20operator,without%20an%20additional%20MiCA%20licence%3F) (CASPs). The MiCA crypto regulation would have considerable authority and oversight over these two major stakeholders within the forces in crypto-asset markets. Issuers must provide authentic, transparent, and continuous details of the products they are dealing in. Service Providers need to certify their merit, undergo registration processes, and even implement anti-money laundering protocols. Only after these providers have ascertained the MiCA regulation of their merit would they be allowed to operate under the European MiCA framework. The MiCA framework would also have complete control over demanding a transparent paper/money trail whenever they see fit. 

The MiCA crypto regulation would also oversee the environmental footprint of issuers and service providers under its umbrella. This will help crypto regain the goodwill lost due to unsustainably high-power consumption mining routines. 

## Cross-border cooperation 

Since the European MiCA regulation is the first of its kind, it has to fulfil a cross-border responsibility of trust and cooperation with other countries looking to build similar frameworks around crypto. This first-mover aspect will offer the MiCA regulation a solid reputation and could help establish it as the focal point of global crypto regulation. 

## Conclusion 

Although MiCA crypto regulation seems to be building toward a product offering that the larger market has been demanding for some time now, it would be interesting to see how crypto enthusiasts worldwide respond to this kind of regulatory oversight. Would they welcome this whiff of centralization in their decentralized product, or will they lash out and reject the muddying of their founding principles? 


MiCA: Responding to the crypto market’s call 

The European Union has released a set of documents relating to an EU crypto regulation action plan for implementing the European Green Deal and the REPowerEU Plan. Both are intended to save energy by digitising the energy sector. It shows that [crypto miners](/news/article/crypto-mining-farms) are on the radar of European energy planners.

## The REPowerEU plan

[The REPowerEU Plan](https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52022DC0230&from=EN) was unveiled in May in response to Russia's invasion of Ukraine, which significantly impacted European energy supplies. The document outlines the EU's strategy for achieving energy independence from Russian fossil fuels by 2027.

The document was a follow-up to the first 'REPowerEU' document, released on March 8, 2022, and outlined steps to avoid Europe's fuel dependence on Russia becoming a weapon against the bloc.

### REPowerEU's primary goal is:

•	Ending Europe's reliance on Russian fossil fuels as soon as possible, ideally by 2027, with a two-thirds reduction in Russian gas consumption by the end of 2022.

•	Securing the EU energy system's long-term sustainability, cost-effectiveness, and energy supply through a controlled exit from this long-entrenched relationship with Russia.

## Commission Staff Working Document

According to the document, Europe accounts for about 10% of global crypto mining, with Germany and Ireland leading the continent and Sweden seeing a significant increase in activity after [mining was banned in China](/news/article/chinas-ban-on-crypto). The European Securities and Markets Authority is expected to draft technical standards for the crypto-mining industry.

The paper also stated that investors require more information about cryptocurrencies' energy consumption. It echoes the EUBOF document, that the EU crypto regulation should take the lead in developing international blockchain standards.

According to a communication from the Commission to bodies including the European Parliament, Council, and European Economic and Social Committee, energy consumption for cryptocurrency mining has more than doubled in the last two years. The proposed [Markets in Crypto Assets (MiCA)](/news/article/euroc) legislation would require crypto-asset market participants to make environmental disclosures.

Meanwhile, due to the tight energy situation this winter as a result of disruptions in Russian fuel supplies, the European Commission, the EU's executive branch, is urging member states "to implement targeted and proportionate measures to lower the electricity consumption of crypto-asset miners to put an end to tax breaks and other fiscal measures benefiting crypto-miners in the longer term".



EU Crypto Regulation to Save Energy

Recently, the United Kingdom and the European Union have introduced significant legislation to regulate cryptocurrencies. Both are working towards providing a safer environment to consumers. However, the divergence between EU and UK crypto regulations is becoming apparent. 

Since Brexit, the UK has been formulating new legal frameworks for different domains. Earlier, the [regulatory divergence](https://www.engage.hoganlovells.com/knowledgeservices/news/uk-and-eu-regulatory-divergence_1) for financial service providers gained much attention. Naturally, this divergence extended to virtual currency regularisation. 

The differences between the laws include the definition of crypto assets, virtual asset service providers (VASP), focus points in the enforcement strategy, and various others.

## How does UK crypto regulation differ?

One of the major differences between the EU and UK [crypto regulation](/news/article/crypto-regulations) is the definition. Britain’s Financial Conduct Authority (FCA) focuses more on “digital settlement assets”. It mainly includes stablecoins as a payment method. However, it does not declare them as a form of investment. On the other hand, the MiCA act of the EU has a broader definition which allows a variety of new tokens to be included. 

Similarly, there are differences in the definition of service providers too. The MiCA framework also proposes a broader interpretation of VASPs. It expands from fiat to crypto to crypto exchanges. Moreover, it covers advisory, trading, and custody services too. In comparison, FCA legal framework covers only custody and exchanges as VASP.

Last month, the [US and UK crypto regulation](/news/article/uk-crypto-regulation) authorities began collaborating to foster the cryptocurrency and NFT market, acknowledging the importance of regulatory partnerships for a safe market.     

## Differences in enforcement strategy

Currently, FCA’s primary focus is on stablecoins to mitigate consumer risk. It is also working with the regulatory bodies of the United States to regularise the market and foster financial innovation. Moreover, like the US’s SEC, it might act against scams and declare some coins and tokens as securities. On the other hand, MiCA focuses on a broad approach that includes the AML laws and establishing a risk-free environment for regional investors. 



UK crypto regulation diverging from the EU

The European Union (EU) has introduced [Markets in Crypto-assets proposal (MiCA)](https://www.consilium.europa.eu/en/press/press-releases/2022/06/30/digital-finance-agreement-reached-on-european-crypto-assets-regulation-mica/), a framework for regulating the crypto market in the continent. On 01 July 2022, a MiCA reporter, Stefan Berger, took to Twitter to announce that Europe has become the first continent to have a regularised crypto policy. 

![MiCA.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/Mi_CA_136bb478bb.png)

Berger mentioned that the Parliament, Council, and Commission have approved a balanced MiCA framework. In addition, he indicated that PoW technology will not be banned; however, crypto issuers will be accountable for energy consumption and its impact on the environment. 

Where MiCA regulation has rejected the ban on PoW technology, it might still affect the digital asset market in various ways. One of the most affected crypto-assets can be stablecoins like EUROC and others. 

## MiCA’s harsh regulations for stablecoins like EUROC

The EU-endorsed MiCA framework has a dedicated section for stabilising stablecoins, including the [Euro coin](https://www.monitalks.io/news/article/euro-coin). The framework has considered the recent crash of Terra Luna, a stable cryptocurrency and formed policies to protect crypto consumers. 

For this reason, the framework proposed certain strict measures that the stablecoin issuers would have to take to mitigate instability and risk. Here are the proposed MiCA regulations for the stablecoins like EUROC:


1.	Stablecoin issuers must have an adequate liquid reserve with a 1:1 ratio.
2.	Stablecoin consumers can claim the token at any time without any additional fee.
3.	All stablecoins will be supervised by the European Banking Authority (EBA.)
4.	Non-European currency-based asset-referenced tokens will be regulated to ensure Europe’s ‘monetary sovereignty.’
5.	Asset-referenced token issuers would need to register themselves in the EU. 

## The stance of Circle’s Euro coin (EUROC) 

According to the Head of Global Policy and Chief Strategy Officer of Circle, Dante Disparte believes that:

>  “MiCA regulation will be to crypto what GDPR was to privacy.” 

Though many crypto users call MiCA a crack-down on the crypto market, Disparte reflected that MiCA policy will likewise work as a guiding framework for crypto issuers and consumers. 



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MiCA: Responding to the crypto market’s call

EU Crypto Regulation to Save Energy

UK crypto regulation diverging from the EU

MiCA regulations impact on EUROC and other stablecoins