Europe’s MiCA Is Finally Here. How Will the U.S. Respond?

Over the past five years, I’ve observed a significant push for regulatory policy development in Europe, spurred on by the looming presence of tech giants like Meta’s Diem (formerly Libra) looking to make their mark in financial markets, or concerns surrounding unregulated cryptocurrencies. The European Union’s Markets in Crypto-Assets (MiCA) regulation is set to play a pivotal role in this landscape. In my analysis, MiCA will have a lasting impact on digitally linked economies by fostering a unique European approach to the integration of digital assets and the traditional financial sector.

Dante Disparte is the chief strategy officer and head of global policy at Circle.

This article represents the perspectives of its writer, which may not align with those of CoinDesk, Inc. or its stakeholders.

As a researcher studying the crypto industry’s development over the past decade, I’ve observed that this field has been marked by frequent boom-bust cycles, making it distinctively American in character. Consequently, the U.S. dollar holds significant influence in the digital asset world, serving as the pricing standard due to the growing popularity of stablecoins, which have surpassed $150 billion in market capitalization. Additionally, the U.S. dollar functions as the reserve currency for internet finance, much like it does in traditional finance. However, the EU’s new regulatory framework, MiCA, aims to challenge this dominance by providing opportunities for euro-denominated stablecoins to thrive within the European Union’s vast 441 million-strong consumer market, classifying them as e-money tokens.

MiCA, which aims to safeguard European consumers and investors from fraud and risks prevalent in fast-moving crypto markets, contains elements of economic and technological self-rule. This is particularly clear when it comes to offshore stablecoins, or global stablecoins as they are diplomatically named, being disallowed under MiCA. European stablecoins, pegged to other currencies, must predominantly adhere to e-money licensing regulations in Europe, which involves complying with prudential, financial crime compliance, and other rules. If a stablecoin issuer provides additional crypto asset services, it must secure one of three licenses – digital asset service provider (DASP), virtual asset service provider (VASP), or crypto asset service provider (CASP) – depending on the jurisdiction. This licensing condition sets a minimum standard for digital asset custody. Furthermore, the era of vague crypto firms with no tangible European presence is now over.

MiCA, or the Markets in Crypto-Assets Regulation, has a twofold objective: it aims to promote job growth and economic competitiveness within the EU, while also ensuring consumer protection and market security. In order to accomplish this, entities that want to operate under MiCA must have a responsible “mind and management” based in an EU member state. Once established in one jurisdiction, these entities can then expand their operations across the European Union through a process called passporting, made possible by the regulatory harmonization taking place at the pan-European level. However, there is still work to be done at the national level to ensure a seamless implementation of MiCA throughout the EU market.

The European MiCA regulation brings significant shifts for the crypto industry and its connection to traditional banking, only suitable for the most committed players. For instance, in the reviving stablecoin segment, where the dollar serves as the benchmark, MiCA signifies a major regulatory hurdle that could result in delisting or limited access for unregulated or non-compliant tokens on crypto exchanges within the EU.

In the current EU regulatory framework, all controlled stablecoins will share a standardized regulatory foundation, fostering competition and eventually resulting in increased fungibility and interoperability across the EU market. The European Union’s Markets in Crypto-Assets (MiCA) regulation, though not perfect and somewhat prescriptive, sets clear guidelines for crypto market participants in Europe. Meanwhile, the U.S. has seen industry growth due to less comprehensive regulations or a lack of uniform federal rules. As technological differences between the EU and US potentially widen, it becomes crucial to consider whether both regions should aim for shared digital commons.

If American policymakers adopt a competitive stance towards the EU in the realm of digital assets, there’s an opportunity to consider a “digital NAFTA” between North America and the EU. However, an enduring option would be forging a transatlantic Western alliance dedicated to digital assets. This partnership would uphold our shared democratic values in these evolving markets while accounting for how exponential technologies influence the future.

With MiCA (Markets in Crypto-Assets) now in place globally, the United States has an opportunity to strengthen its position as a pioneer in financial services regulation and technological advancement.