For more than 2 years, Adan, their members and their supports within the crypto-asset industry have been willing to contribute at every stage to the building of innovative and adapted regulations aiming at helping the new crypto sector to grow in a safe environment for them and users. In this view, Adan shares the same objectives as the European Union and has always been favourable to the Markets in Crypto-assets (MiCA) regulation. Indeed harmonisation of rules among EU actors is a multi-faceted opportunity to help the industry structure and expand their activities more easily thanks to passporting, ensure level playing field, enter into business partnerships with institutional actors, give serious and credible actors a tool to differentiate from others.
This being said, Adan is extremely alarmed by MiCA perspectives.
On the one hand, Adan is very concerned about the recent evolution in the conduct of regulatory debates. First, the acceleration of negotiations and calls to finalise and implement MiCA in a very short term which threaten the quality of this regulation. Second, incomplete and sometimes obsolete information regarding crypto-assets and the state of markets which some recent discussions rely on. Third, the lack of sollicitations of European crypto companies to be part of these debates, which would give a better understanding of their activities. They are indeed the best interlocutors to assess impacts of new regulatory proposals and to estimate which rules are adapted, proportionate and efficient. MiCA regulation will affect businesses and jobs on a micro level and the future of the European digital economy on a macro level: we cannot make such important decisions for the future without a perfect awareness of the sector, risks but also opportunities of crypto-assets and consequences of regulatory developments.
On the other hand, regarding the content of some requirements, MiCA could miss EU objectives to find the right balance between investor protection and innovation enhancement.
In the context of trilogues, three main areas of improvement could help restore such balance.
Proportionality. Innovations brought by crypto-assets are built by newcomers. According to Adan’s state of play of the crypto industry in 2020, 83 % of the French crypto industry are less than five years old. The 600 crypto projects in France (according to the public investment bank Bpifrance) enter various economic sectors. To this end, betting on the incumbents only to build crypto-asset markets is not a winning one. If obviously creating bridges between traditional actors and new markets is normal to build upon their regulatory experience, the specific profile of new pure players should also be taken into account. As such, according to the aforementioned Adan’s state of play, 62 % of teams are less than 10 employees, the vast majority of companies struggle to find fundings, etc. This means more proportionate rules for crypto-asset service providers (CASPs) and stablecoin issuers (in terms of fund requirements, liquidity requirements, etc.), sizing requirements for entities according to the size and the maturity of their activities, granting the same exemptions that other financial intermediaries benefit from when crypto actors meet the same conditions. Proportionality should be appraised by the conduct of impact assessments of MiCA requirements by EU authorities.
Adaptability / exploiting technological opportunities. Not only MiCA does not rely enough on technological opportunities but also does not take into account specificities of crypto-assets and blockchain technologies. If getting inspired from the traditional regulatory paradigm is understandable as a first approach, a necessary next step is to rationalise rules where they are not adapted or can be simplified without hampering investor protection or stability of markets. MiCA requirements should rely on new actors’ operational and technical skills and background as pure players. This will avoid creating situations where companies cannot be compliant de facto and where inefficient and too burdensome rules harm their businesses. For instance, it would be beneficial to encourage sustainable mining activities in Europe, allow innovative use cases using interests, and think about proper rules to decentralised applications (including stablecoins) and non-financial crypto-assets (including NFTs) rather than applying MiCA made for centralised financial activities. MiCA must absolutely concentrate on financial activities.
Pragmatism. As a new then less mature sector, the crypto-asset industry is still being structured. The introduction of regulations should not challenge neither companies development nor their competitiveness. Therefore restoring progressivity into MiCA rules is crucial. This is also a more realistic approach for supervisors that will also need to adapt to the extension of the scope of entities they supervise, develop their skills, and get all necessary means. Progressivity appears then essential to ensure efficient supervision and not to penalise actors. This should be found in creating a fast track for CASPs already authorised under national regimes (as it was done for crowdfunding actors), granting more realistic tolerance periods for them to get compliant, planning a gradual implementation of MiCA and other regulations applying to crypto actors (like anti-money laundering and financing of terrorism regulations), engaging in long-term work on DeFi and NFTs.
In the final stretch, MiCA could still be able to become a really efficient and balanced regulatory framework that both companies and regulators call for. Failure to do so will materialise inevitably into a massive flight of talents and businesses out of the EU, which is becoming an increasingly credible option for them in the context of the current debates. In the end, pushing our future champions out of the EU is likely to infringe on our common objectives to create a safe environment for citizens that wish to benefit from new services offered by the crypto sector, and to guarantee legal certainty for companies. Such a situation would undoubtedly lead to destroying employment and wealth for Member states and undermining EU digital sovereignty.
For these crucial challenges, Adan is available to progress with EU institutions.
Adan (Association for the Development of Crypto-Assets) is a non-profit bringing together and representing crypto-assets and blockchain professionals in France and Europe. Adan’s members cover a wide range of activities: crypto-asset markets, custody, payments, investment management, blockchain analysis tools, support for crypto/blockchain projects, IT security, etc. Adan’s mission is to promote the development of the crypto-assets industry in favour of a new digital economy. To this end, the Association has technical and regulatory expertise in the world of digital assets and maintains a close dialogue with public authorities and industry associations.
Faustine Fleuret, President and CEO : [email protected]
Mélodie Ambroise, Head of Strategy and Institutional Relations : [email protected]
Hugo Bordet, Regulatory affairs : [email protected]