The European Commission has published a regulatory proposal that defines a specific system for digital assets. The crypto community is pretty skeptical.
Fintech has made its major accession to the European Commission. The institution published its strategy for digital finance in six texts on September 24th. The one on cryptocurrencies was one of the most anticipated. Called MiCA, for markets in crypto assets (and available at the end of this article), it finally answers the big question that the blockchain and crypto ecosystem has been asking for months: will crypto assets have their own regime? or will they be associated with financial securities? After all, it is the first option proposed by the Commission. To the great relief of the French. « It’s pretty positive. If we had a system linked to financials, it would have been too difficult for small businesses, » said Simon Polrot, president of the Association for the Development of Digital Assets (Adan).
This ad hoc regime, slated for 2024, does not come out of the hat of the Commission, which in fact was largely inspired by French regulations and the digital asset providers (Psan) regime launched in 2019. The future European regime would be compulsory rather than optional as in France (it is still compulsory for certain specific activities). This European regime for cryptocurrencies, in particular, would allow companies based in France to pass their approval on to the 27 other member states of the European Union, as is the case with fintechs, which for example have a permit from the establishment of electronic money.
« If we had a financial-related system it would have been too difficult for little players. »
To preserve this holy grail, the national regulator wouldn’t be the only one putting its stamp on it. « Depending on the importance of the project, approval can either be given by the local authorities or by the EBA (European Banking Authority, editor’s note) and sometimes even in consultation with Esma (the European Financial Markets, editor’s note). This means that possibly three supervisory authorities are involved, hence an approval period of at least six months « , regrets Simon Polrot. « Psan approval, for example, which is justified, is also restrictive because you cannot do business for six months. In Switzerland you can start the same service in a week, » adds William O’Rorke, attorney at ORWL. a law firm specializing in digital law.
Reassure Big Companies
This specific regime would also reassure large corporations, institutions and large investors, who are still few in this sector. « Many institutions have always feared the lack of legal certainty in relation to crypto assets. With this regime they can develop new crypto activities, with the exception of financial instruments (no security tokens, which are themselves equated with securities). Editor’s note), « says Matthieu Lucchesi, attorney who specializes in fintech matters at Gide Loyrette Nouel. « This legitimizes the cooperation between players in the industry and traditional players, » adds Alexandre Stachtchenko, co-founder of the specialist company Blockchain Partner.
« We can sense the fear that several euro zone finance ministers are facing certain stable coins and especially the scales. »
However, the actors in the sector, who are mostly small startups, could be penalized compared to large accounts. « Is this reaction adapted to the characteristics of a still small economy? Isn’t there a risk of smashing it with 168 pages of regulations? » Asks Matthieu Lucchesi. « I’m not against regulation, but there is a mismatch between the recently linked regulations and the reality of a young and fragile market made up of small businesses. This could favor the big players who are neither. » French or European, ”complains William O’Rorke.
The fall of stablecoins
In this text, one element has caught the attention of the ecosystem: stablecoins, these stable cryptocurrencies that are generally backed by fiat currencies (dollars, euros, etc.). The definition used hardly distinguishes between digital currencies from central banks, private currencies of the Libra type (the project initiated by Facebook) and decentralized stable coins. « We are feeling the fear of several Eurozone finance ministers in the face of certain stable coins and in particular the Libra, which is very annoying because Facebook is competing with a power that was previously transferred to the central bankers, » estimates Nicolas Louvet, managing director of the crypto broker Coinhouse. however, indicating that it is important to regulate stable balance type coins.
Decentralized stable coins like the very popular Dai would therefore fall under this regulation. However, the latter is booming due to the explosion of decentralized finance, a concept that brings together financial products developed on the blockchain, i.e. without intermediaries (see our article on decentralized finance). These stablecoins are used, for example, for borrowing in the blockchain. Since they are decentralized, they cannot be controlled or banned (like Bitcoin).
On the other hand, Europe-based cryptocurrency exchange platforms couldn’t list these famous stablecoins. Unless the issuers of these stablecoins have an e-money license, which is unlikely. « There wasn’t necessarily an understanding of what decentralized finance is, those stable coins, and the potential of those digital assets. It’s a whole new part of the industry. If you don’t allow a European user to get stable coins, you run the risk of that the development of defi products is blocked (abbreviation for decentralized finance, editor’s note). There are not many in Europe, as most of them come from the US and Asia, « says Nicolas Louvet. « We will do everything we can to explain what it is, just as we did three years ago to talk to the General Directorate of the Ministry of Finance and the AMF (Autorité des Marchés Financiers, editor’s note) about our activities), while the ACPR (Prudential Control and Resolution Authority, editor’s note) has closed its doors to us. Finally they understood, « recalls Nicolas Louvet. The crypto ecosystem still has time to change the text. In the meantime, he can still offer decentralized or non-decentralized stable coins.