MiCA May Pave The Way For Classifying All Cryptocurrencies As Tradeable Securities

european union CBDC MiCa

The emergent legislation within cryptocurrencies, more commonly known as MiCA, offers a radical departure from the status quo but may only yield limited short-term advantages without implementing additional measures, a comprehensive report sponsored by EU legislators articulates.

Recognizing Crypto Assets as Securities and DeFi Governance

The study suggests that cryptocurrencies should be acknowledged as securities by default, arguing for the legalization of autonomous entities that administer decentralized finance (DeFi). This bold proposition comes from an academic review conducted on behalf of the European Parliament and was released for public scrutiny this Tuesday.

As the European Union is nearing the final stages of implementing its Markets in Crypto Assets (MiCA) regulations, it also contemplates if a successive regulatory framework would be needed to address other aspects such as DeFi, staking, and the burgeoning field of non-fungible tokens (NFTs).

The Implications of MiCA On Crypto Asset Regulations

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The report takes a firm stance, stating that all crypto assets should be considered transferable securities. That implies they would be subject to the stringent governance and approval laws that traditionally apply to conventional stocks and bonds. Such regulations would persist unless a national regulator expressly states otherwise.

This fundamental rule “shifts the burden of gathering technical facts and arguing the breadth of regulations” from regulatory bodies to the industry. This notion comes from a scholarly report, penned by a team of academics from universities in Luxembourg, Sydney, and Hong Kong, at the request of the European Parliament’s Economic and Monetary Affairs Committee.

The authors express reservations about the immediate positive effects of MiCA, citing the complexities of enforcing its rules in a “translucent cross-border environment.” This context features a competitive landscape with approximately 10,000 cryptocurrency protocols vying for the most favorable regulation. However, it is essential to note that these findings do not represent a formal position of the European Parliament.

The Regulatory Confusion Plaguing the Crypto Industry

Cryptocurrencies have been riddled with ambiguity regarding the applicability of traditional financial securities’ rules to digital assets. In the U.S., the Chief of the Securities and Exchange Commission, Gary Gensler, has refrained from commenting on whether prominent cryptocurrencies such as Ether (ETH) fall under his regulatory jurisdiction. However, a string of legal proceedings against firms like Ripple has sparked allegations of regulatory enforcement.

With MiCA officially becoming law this Wednesday, EU agencies overseeing banking and securities markets are now tasked with outlining the specific rulemaking procedures to effectively implement it. However, even prior to this development, the European Systemic Risk Board, an EU panel responsible for overseeing financial stability risks, has advocated for additional legislation to address what MiCA does not cover.

Examining the Legal Status of DAOs

Experts from the U.K. are also scrutinizing the legal standing of decentralized autonomous organizations (DAOs), a potential stepping stone to the regulation of a sector the report describes as a “Wild West” teeming with “fraudsters and thieves.”

This in-depth analysis of the upcoming crypto regulations under MiCA aims to shed light on the rapidly changing landscape of the crypto industry. As legislators and stakeholders navigate the complexities of this new frontier, the eyes of the world remain focused on how these bold new regulations will shape the future of crypto assets.

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