EU to Set the Stage for Crypto Regulation

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The war between Ukraine and Russia has highlighted the ability of cryptocurrency and blockchain technology to function where centralized financial institutions fail and placed both center stage in front of the international community. The indiscriminate utility of crypto by Russians to bypass sanctions has also made the call for regulation and oversight much louder among many states. As such, the past few weeks have been significant for the world of crypto and the next few are ramping up to be no less important as major legislative pieces appear on the scene.

The much anticipated Executive Order from President Biden, requesting government agencies to assess and recommend policies for cryptocurrencies, is forthcoming this week.  Meanwhile, the European Parliament will vote on the Markets in Crypto-assets (MiCA)  regulatory framework come March 14th. The Executive Order is unlikely to make any immediate changes in crypto regulation in the U.S., whereas MiCA is tangible legislation that will play a strong role in shaping the future legality of crypto in much of the Western world.  

The objective of the European Parliament with MiCA is to define cryptocurrencies, service providers, services, and technology, then provide oversight into how the single market will interact or govern these actors and providers. Originally, MiCA contained a ban on proof-of-work coins like Bitcoin, citing their environmental impact and energy usage, however, this language was recently removed before the final draft of the bill was submitted.  The parliament remains split on this decision, especially when an energy crisis looms at the backdrop of the current war, but there is always room for further adjustments.  

For now, MiCA represents the largest piece of regulatory framework in the crypto space and will likely serve as an important benchmark for the future. Even if other states aren’t influenced by MiCA, the laws passed next week will govern the market of the entire European Union.