With the broader and more accepted use of cryptocurrencies, governments have put in place numerous new regulations that would govern this complex and innovative field. The most comprehensive set of such regulations has come from the EU.
Since the UK is no longer a member of the EU, the question remains how it will regulate its own cryptocurrency market. There’s a large, complicated, and growing market of cryptocurrencies in the UK, and the government is looking for ways to regulate their work without stifling it. The EU regulations will be taken into account when creating a framework for the UK laws.
What’s MiCA?
MiCA stands for Markets in Crypto-Assets Regulation, and it’s the regulation that governs the use of cryptocurrencies in the UK. It’s one of the most comprehensive, if not the most comprehensive, regulations in that area. As is the case with most laws in the EU, it’s a product of complicated law-making and compromise between different countries.
At the same time, MiCA will be used as a role model for other countries that plan to regulate the use of crypto, invest in it, and work on crypto exchanges. The UK and the US are most likely to use MiCA as its model.
Wider Use
The need for this broader legislation comes at a time when there’s a wider use of cryptocurrencies. There are more casinos and gambling sites that provide payment options in crypto. Examining the Betfury review shows that these establishments offer much better conditions than the ones that use fiat money.
At the same time, traditional financial institutions are also looking into making crypto payments. Traditional and luxury brands are also changing their approach to crypto and allowing their customers to purchase their products using cryptocurrencies.
How the UK Sees MiCA?
The UK plans to adopt its own approach to crypto as a part of a broader policy of distancing itself from the EU and, in a way, becoming a safe haven for businesses that are escaping strict EU regulations. However, when it comes to MiCA, there’s a lot of agreement, as the law is seen as comprehensive and fair.
“While not flawless, MiCA is an extremely relevant regulatory stack that puts significant pressure on the U.K. and the U.S. in terms of delivering operational clarity for crypto,” London-based lobby group CryptoUK said in a tweet on Thursday.
The UK Plans
The UK has already laid out its plans to regulate the use of cryptocurrencies as a part of its broader financial agenda after leaving the EU. Such a strategy has been issued in a document called the Financial Services and Markets Bill. Crypto provisions are only a part of this bill.
Consultations were held in February on the potential regulations that were implemented, and these were mostly made to protect the customers using crypto to make payments. However, this bill has not yet found its way to Parliament, as it’s subject to complex negotiations.
Speeding Things Up
It’s safe to say that the implementation of MiCA, which started in January of this year, will somewhat speed up the process. U.K. Treasury Economic Secretary Andrew Griffith told CNBC that the government hopes to set out specific legislation for crypto in the next 12 months.
The UK is already behind the EU in this regard, and that was one of the outcomes it hoped to avoid with Brexit. During the Brexit campaign and later negotiations, the UK claimed that EU legislation is too slow and depends on too many individual parliaments. However, in this regard, it was faster than the UK one.
“With the adoption of MiCA, the EU has solidified its position as a regulatory leader for years to come,” CryptoUK said.
“There are aspects of [MiCA] which are interesting, and I think everybody likes, so we have factored that in our paper,” Gwyneth Nurse, director general of financial services at the Treasury, said at Innovate Finance’s annual Global Summit in April, referring to the U.K. consultation on crypto rules.
What Will Be Similar?
There are already some similarities between the UK plans and the MiCA solutions. These are the solutions the UK will mimic as they were done very well in the MiCA regulations. The U.K.’s consultation said policymakers were considering an authorization regime similar to that of MiCA.
This means that the businesses trying to set up a cryptocurrency will go through the same or very similar process when they are doing so in the UK and the EU. Due to the global nature of cryptocurrencies, this can be useful for both sides, as there’s a chance that there will be companies working in both the UK and the EU.
What will be Different?
At the same time, there are already some differences that the UK will insist on when compared to EU regulations. The EU made significant room for rulemaking around asset-backed stablecoins; the U.K. is attempting to regulate them as payments. Stablecoins are one of the most interesting digital assets since they operate as a cryptocurrency but are based on the value of a fiat currency such as the US dollar. The use of such currencies is on the rise, and everyone is looking for ways to regulate them.
Diverging from MiCA, the U.K.’s crypto proposals leave out areas such as settlement and financial advice. It’s important, however, to keep in mind that these proposals have not yet been finalized.
The Advantages of MiCA
It’s not easy to say what the advantages of MiCA will be when compared to the UK regulations when it comes to the merits of the law itself, as the laws aren’t yet written. However, it’s already clear that the advantage comes from the fact that the EU came up with its regulations first.
It’s important to set up the regulation systems that will govern this complex field, and those who manage to do so first and in a comprehensive way will set up the stage for everyone else trying to do it. The EU is now taking up that mantle.
Changed in MiCA
There are already talks that MiCA will have to go through changes and upgrades in the next couple of months to a year. Some experts and the media already call these MiCA 2.0. This shows how quickly the industry is moving and how difficult it is for governments to follow along.
The UK may be able to learn from these changes and implement the new regulations set forth in MiCA and MiCA 2.0 into its regulations all at once.
Conclusion
The EU has come up with a comprehensive set of regulations governing the use of cryptocurrencies. These are known as MiCA, and they’ve come to an effect this year. Many countries outside the EU may follow their lead and base their regulations in this area on MiCA.
The UK will soon come up with its own regulations as a part of a larger law dealing with finance. The UK is currently behind the EU in this regard, and the plan was for Brexit to allow the UK to cut the restraints of the complicated EU political system. The law the UK parliament will adopt will be partially based on MiCA.
