The European Union’s broad regulatory regime for cryptocurrency companies, the Markets in Crypto Assets (MiCA), is set to come into force at the end of the year, but, with just three weeks to go, almost a A quarter of the 27 countries that make up the bloc are not ready.
For the regulations to apply in the country, EU members must align local laws with MiCA. Among those that have not yet done so are Belgium, Italy, Poland, Portugal, Luxembourg and Romania, according to a document created by the Electronic Money Association, a trade body, which was shared with CoinDesk.
Trade associations representing the crypto industry say this state of unpreparedness is being taken too lightly by higher authorities at the European Commission and the European Securities and Markets Authority (ESMA), who are determined to maintain year-end implementation date even if countries fail to comply. he.
“The implementation of MiCA in national legislation is not happening as it should,” said Robert Kopitsch, co-founder of Blockchain for Europe, a Brussels-based organization whose board includes Coinbase executives (COIN), Binance, Ripple and Ava Labs. .
Two-step process
The implementation of MiCA, which became law last year, is divided into two phases. The first occurred in June, when stablecoin issuers had to ensure they had the appropriate authorization to operate in the country.
The second – December – concerns crypto asset service providers (CASPs) such as exchanges, wallet providers and custodians. These companies must be registered and based in at least one country in the European Union to apply for a license under MiCA that allows them to operate across the entire trading bloc.
According to several crypto industry trade associations, a major problem for some national regulators, the so-called National Competent Authority (NCA), is the short time between the deadline and October, when which certain regulatory technical standards have been finalized. This left only two months to deal with the resulting paperwork and complexity.
“Under such time constraints, it will be very difficult for the responsible NCA to properly manage the CASP request, which is crucial for initiating effective supervision based on a well-established regulatory relationship,” reads a letter sent to ESMA last month. The letter was signed by Blockchain for Europe, the European Crypto Initiative, the Electronic Money Association and the International Association for Trusted Blockchain Applications.
The professional groups have requested a six-month “no action” period. In other words, it is about suspending enforcement activities so that companies that have not yet received authorization will not be penalized if they continue their activities.
So far, ESMA has rejected the request, but the MiCA deadline will be considered at a meeting on December 11. While the suspension of enforcement is unpleasant, ESMA may be preparing to offer “guidance” on the timeline, according to a person familiar. with the case. ESMA declined to comment.
With no alternative other than an inevitable registration delay, some companies could be forced to shut down their crypto operations, said Kopitsch of Blockchain for Europe.
“If you don’t have a license by a certain date, you basically have to stop your services in Europe,” Kopitsch said. “Imagine what that means. Very bad for business and users will be upset. And that doesn’t give a good image of the EU.”
Kopitsch identified Ireland, Portugal, Poland and Spain as countries struggling to meet the deadline. Three others, who asked to remain anonymous, agreed, with Italy, Malta, Cyprus, Lithuania and Belgium also mentioned.
Legislating takes time
Despite being relatively advanced in regulating crypto assets, even Germany has been mentioned by the Electronic Money Association as a country experiencing problems. The reason is that the existing cryptographic framework in Germany needs new legislation to meet the MiCA specifications, a process which may take time. Malta also has a crypto regime which must be aligned with MiCA, the EMA said.
“It’s a political process and a legislative process,” Helmut Bauer, a consultant to the Electronic Money Association, said in an interview. “My understanding is that this has been a problem for Germany and that this process has been delayed. BaFIN seems quite aware, but they have to wait for the legislation.”
BaFIN, the German financial regulator, allows banks to hold crypto assets within a framework initially based on Markets in Financial Instruments (MiFID) rules.
National regulators also identified the legislative procedure as the bottleneck in implementation, pointing the finger at their governments.
In Poland, the Financial Supervisory Authority (KNF) said the Ministry of Finance coordinates the process and is responsible for meeting deadlines.
“The Polish draft law on the crypto-asset market received a positive opinion on compliance with EU law and is currently in the European Affairs Committee,” a KNF spokesperson said by email. “We are aware that the law should be adopted by the end of the year, but the Polish Financial Supervisory Authority has no direct influence on this (…) Poland is not the only country that has not yet adopted a national law and the challenges facing member states are similar.”
The Portuguese Securities Market Commission said by email: “The legislative proposal that implements the responsibilities arising from the European MiCA regulation, as well as the distribution of powers between the CMVM and the Portuguese Central Bank (Banco de Portugal), falls under the jurisdiction of the Portuguese government and is currently under study by the government.
A spokesperson for the Belgian FSMA said by email: “As a (political) decision on the designation of competent authorities for MiCA is pending, the FSMA cannot answer your questions. »
The Central Bank of Ireland is encouraging early engagement of applicants and is engaged in a pre-application process with a number of companies seeking authorization under the MiCA.
“A company’s progression to the next stage of the CASP application process will depend on the nature, scale and complexity of the company as well as the applicant’s degree of preparedness,” said via email a spokesperson for the central bank. In general, in our experience, better-prepared companies, willing to transparently engage in all stages of the permitting process, move through the process more efficiently.
A spokesperson for Italy’s financial regulator, the Commissione Nazionale per le Società e la Borsa (CONSOB), said by email: “At this stage your question should be posed to ESMA rather than Consob as as a national authority. »
Germany, Malta, Cyprus, Lithuania, Luxembourg, Spain and Romania did not respond at the time of publication.
