The European Union’s crypto regulation, called MiCA (Markets in Crypto-Assets), will come into effect during this 2024.
According to several experts, it will have a profound impact on the entire crypto sector, to the point of even becoming a global reference point for crypto regulation.
Since its actual entry into force is not far off, some exchanges have already started to prepare, making it possible to carry out a first analysis.
MiCA: Bitget Research’s Q&A on the impact of the new European crypto regulation
Recently, a Q&A was held with Bitget Research to analyze the impact that MiCA will have – and is already having – on European crypto markets.
The starting point were the operational and compliance challenges that the new European crypto regulation poses for both crypto platforms and traders themselves.
The European Union’s community policies are actually quite favorable towards traders, but with the necessary precautions, they also end up being favorable for crypto platforms.
One of the key aspects in this sense is the transparency of community policies towards cryptocurrencies, which serves as a cornerstone for achieving widespread adoption of crypto assets.
This is what emerged in particular from the Q&A of Bitget Research, with the statement that this transparency of the new EU policies regarding will also help crypto platforms to have clear guidelines to follow, while ensuring full protection of the rights and interests of traders.
For example, in the USA such a framework has not yet emerged, as they have not yet adopted a proper crypto regulation.
Just think about the major issues that Coinbase, the largest American crypto exchange, is facing with the SEC to understand how clear regulation can be helpful.
The future of crypto trading
Another point addressed during the Q&A of Bitget Research is related to the future of crypto trading in the European Union after the entry into force of MiCA.
According to Bitget experts, MiCA will bring greater legitimacy and stability to the crypto markets, thanks to clearer regulations, and the new comprehensive legal framework for crypto operations will also attract more cautious institutions and retail investors who have been discouraged by the lack of specific regulations so far.
So the crypto market could become more stable, with reduced volatility. At the same time, innovation would also be enhanced.
Indeed, these regulations could create an environment that effectively promotes innovation, within clear legal boundaries.
In this way, companies could have more confidence in investing resources to develop new crypto technologies and services, to the point of even positioning the EU as a global hub for innovation in the blockchain and crypto sector.
However, it must be added at this point that so far this has not yet happened, because up to now it has been mainly Switzerland (which is not part of the EU) to be the true major European hub of the crypto world.
Furthermore, at a global level, the United Arab Emirates (UAE) are emerging strongly, and in particular Dubai, as a major global crypto hub.
However, at least now even EU countries can at least aspire to start a path that can lead them to try to become European crypto hubs, and the United Kingdom (which is not part of the EU) could follow suit.
Consumer protection guaranteed by the crypto regulation MiCA
It should not be forgotten that the new EU regulatory framework on cryptocurrencies also concerns consumer protection.
Indeed, the new regulations also introduce measures to protect consumers from fraud, scams, and market manipulation, and this could ultimately further increase confidence in the crypto markets, encouraging more people to participate and invest.
However, there will also be new restrictions on some stablecoins, and this could lead to a decrease in crypto market liquidity.
Such a scenario will make it more difficult for traders to make very quick purchases and sales, especially in markets with lower liquidity.
At that point, traders may look for alternative assets that can be used for liquidity and hedging, such as other stablecoins or cryptocurrencies without restrictions that offer similar benefits.
Market dynamics
That of stablecoins and liquidity is not the only dynamics of the crypto markets that could change after the entry into force of MiCA.
According to Bitget analysts, a stricter regulatory framework could lead to an increase in barriers to entry in the crypto markets, particularly due to the expansion and greater dissemination of Know Your Customer (KYC) and Anti-Money Laundering (AML) controls, in addition to reporting obligations.
This could even lead to some small or non-compliant platforms exiting the European market, consequently reducing the exchange channels for certain crypto assets.
Some cryptocurrencies could even disappear from exchanges, due to potential specific compliance issues of some crypto projects, thus reducing the volume of trades in Europe.
The case of Binance, which has already exited the Dutch market, or OKX, which will delist trading pairs in USDT in Europe, is cited as an example.
On the other hand, however, more traditional financial institutions could enter, and this could instead lead to an increase in trading volumes and liquidity.
One of the consequences of all this could be a greater spread of the euro on crypto exchanges, or the spread of new stablecoins on the euro such as EUR Coinvertible (EURCV) by Société Générale already launched on the European exchange Bitstamp.
Ultimately, many European investors and speculators could end up preferring authorized platforms that are more compliant with regulations, especially if crypto assets were to start arriving on well-known stock trading platforms.
So in the end the picture could still be positive, even if it is made up of both lights and shadows.
It remains to be seen how individual European countries will actually be able to ride this innovation wave in order not to leave Switzerland and Dubai as the undisputed leaders in this field.