The Electronic Money Association requested the Department of Finance a most extended transition period before implementing the MiCA regulation.
According to a report by the Independent, the organization, which has major fintech players such as Revolut and PayPal, among others, wrote to the EU regulators asking for more time before applying the new regulatory framework.
The MiCA framework will require crypto companies to obtain authorization from a national competent authority before offering their services in the EU. It will also impose capital requirements, governance standards, disclosure obligations, and consumer rights for crypto firms.
The MiCA is expected to come into force in December 2024, but some crypto companies are hoping for a more extended transition period of up to five years. They argue that the new rules could be more complex and costly to implement, especially for smaller and more unique players in the industry. They also fear that the regulations will stifle innovation and competition in the crypto space.
The background of MiCA can be traced back to the increasing popularity and adoption of cryptocurrencies and digital assets, which have raised concerns regarding investor protection, market integrity, and financial stability. The need for a harmonized regulatory framework across the EU has created a fragmented and uncertain regulatory landscape for crypto-assets.
One of the critical challenges of implementing MiCA is striking the right balance between regulation and innovation. The crypto market is known for its fast-paced and innovative nature, and overly burdensome rules could stifle innovation and hinder the industry’s growth. Therefore, regulators must carefully design regulations that provide adequate investor protection without stifling innovation.
Another challenge is the cross-border nature of the crypto market. Geographical boundaries do not bind cryptocurrencies and digital assets, and therefore, a harmonized regulatory approach is necessary to ensure a level playing field for market participants across the EU. Coordinating and aligning regulations among member states can be complex, requiring close collaboration and cooperation between regulators.
Additionally, the evolving nature of the crypto market poses a challenge for regulators. The technology and market dynamics are constantly changing, and regulators must adapt and update the regulatory framework to keep pace with these changes. This requires a flexible and agile approach to regulation, which can be challenging in a highly regulated environment.