MiCA vs. global crypto regulations: How Europe’s new rules compare
Today, cryptocurrency has gone up to trillion dollars market and principals have not been able to regulate something that should not be floating. There are countries with clear frameworks and there are countries that are still debating about the framework of classification of digital assets. The MiCA regulation is Europe’s attempt to bring legal clarity and consumer protection to crypto markets. However, on global rules, how does it compare? There are different approaches in the United States, Asia and the UK. In order for businesses and investors to understand the changing regulatory landscape, it is essential to understand these differences.
Overview of MiCA: What makes it different?
The European Union’s first comprehensive legal framework for cryptocurrencies is the Markets in Crypto-Assets (MiCA) regulation. Unlike other regions, MiCA’s rules are not fragmented and create a standard for all 27 EU member states. It covers issuers of crypto assets, trading platforms and service providers, so that businesses operating in any EU country are subject to the same rules. The licensing requirements are one of the key features of MiCA. Before offering services in the EU, crypto service providers must be authorized by a national regulator, including Germany’s BaFin and France’s AMF. This guarantees that all companies satisfy the identical financial and operational standards. On the other hand, the US depends on a combination of state and federal rules, which leave businesses in the dark.
Additionally, MiCA also contains strict rules on stablecoins, forcing issuers to keep full reserves and limiting the daily amount of transactions of non-euro stablecoins to €200 million. In order to prevent risks to financial stability, which became urgent after the 2022 collapse of TerraUSD, this is done. But in the US, there is one law for stablecoins – none, as different agencies enforce different rules.
Crypto regulations in the US: A patchwork of rules
In contrast to the EU, there is no one law in the US about cryptocurrencies. Conversely, various agencies govern various sections of the market, and this division confuses business and investors. Many crypto assets are treated by the Securities and Exchange Commission (SEC) as securities and thus must comply with financial laws. Yet cryptocurrencies like Bitcoin are considered commodities by Commodity Futures Trading Commission (CFTC) and overlap regulations apply. State level licensing is one of the biggest challenges for US crypto businesses. Obtaining money transmitter licenses in multiple states requires different requirements from each state. It is difficult for startups to expand nationwide because of that. By contrast, the MiCA regulation simplifies operations for companies in the EU by allowing a single license to cover all member states.
Stablecoins in the US also face regulatory uncertainty. Different approaches have been proposed by the SEC, CFTC and Treasury Department, but no consensus framework has been established. For example, some stablecoin issuers like Circle backing USDC, are fairly close to regulators, while other issuers like Tether (USDT) are under fire for their reserves. On the other hand, MiCA’s very clear rules on stablecoins bring more clarity for issuers. Secondly, there is a difference in how crypto lending and staking is treated. Aggressively targeting companies offering these services, the SEC has argued that the services should be regulated like securities. In 2023, major platforms were torn down over staking and other programs – Kraken and Coinbase faced legal action. Staking is not covered by MiCA in its initial framework, and the issue is left open for future EU regulations.
Asia’s crypto regulations: A mixed approach
However, Asia does not have any unified regulation when it comes to cryptocurrencies, as countries pursue songs divergent approach. China has taken a very strict ban whereas Japan and Singapore have developed a structured framework to support the industry. China is one of the most hardline countries when it comes to crypto. In 2021, the country banned crypto exchanges and trading, forcing businesses to move. However, that’s far from the case, and China is a significant player in crypto mining despite the ban, limiting the impact of heavy policies. The MiCA regulation, in contrast, does not ban trading but regulates it to ensure market stability.
Japan has one of the most structured crypto regulatory systems in the world. But exchanges (which are regulated by the Financial Services Agency, or FSA, which demands they follow strict licensing and security standards) as yet have no physical reach into users’ homes. And that limitation is likely to worsen next year. In Japan, banks and trust companies are also allowed to issue digital currencies, which are regulated clearly. This is quite similar to MiCA’s approach, where stablecoin issuers will have to hold reserves and follow financial laws. With the Payment Services Act (PSA), Singapore is seen as a crypto friendly hub as it has been able to attract major exchanges. Crypto firms are regulated by the law but the law gives them flexibility in innovation. While MiCA does cap stablecoins, Singapore gives crypto projects more freedom to operate, meaning it is a good place for crypto companies to set up, with regulatory clarity but less restriction.
The UK’s post-Brexit crypto strategy
Since leaving the EU, the UK has its own approach to crypto regulation different than MiCA. Crypto firms are overseen by the Financial Conduct Authority (FCA) and crypto firms need to register for anti money laundering (AML) compliance. Yet, however, the UK has yet to introduce something as comprehensive as MiCA. The key difference between the UK and the EU on stablecoins is how they are treated. MiCA sets stringent rules, but the UK intends to treat stablecoins as a payment method and not to set transaction limits as outlined in the law. In this way, the UK could be more appealing to stablecoin issuers seeking a less restrictive environment.
There is also discussion of a possible central bank digital currency (CBDC) in the UK, a ‘digital pound’ to be exact. MiCA does not apply to CBDCs, but it does provide a regulatory framework for private stablecoins that prevents them from destabilizing the financial system. Cryptocurrency adverts are controlled by the FCA, and it has been stringent on the market-barring false promotions and requiring firms to put clear risk notices. MiCA even follows a similar path, with all new tokens having to disclose potential risks before being listed on exchanges. The UK is also looking at its own Cryptoassets Regulation Bill which will follow some principles of MiCA but also allow for a bit more flexibility. The EU wants a single rulebook that applies to all member states while the UK’s structure is still evolving and different rules are in place for different aspects of the industry.
Conclusion
The MiCA regulation sets a clear and structured legal framework for crypto businesses in the EU, offering uniform rules across 27 countries. On the contrary, the US is still fragmented and various agencies are applying conflicting regulations, compliance of which is hard. Crypto innovation is supported by Japan and Singapore, but China is strict when it comes to banning crypto. The UK is following a unique post-Brexit path, aligning with parts of MiCA while keeping flexibility on the important issues such as stablecoins.
In order for businesses and investors to opt to operate somewhere, regulatory clarity, business costs and market access have to be addressed. On the one hand, MiCA offers a stable legal environment, but on the other hand, its strict rules might make some companies relocate. As regulations continue to grow in the future, the global crypto industry will move and ready to accommodate the growth with growth and innovation alongside oversight. These differences will help crypto regulations understand differences in the areas that are changing.