1st July 2022 > > Markets in Crypto Assets.

tl;dr

Markets in Crypto Assets (MiCA) is subject to change.

Market Snap (at time of writing)

Market Wrap

The outlook for risk assets remains grim.

Curious Cryptos’ Commentary – Markets in Crypto Assets (MiCA)

MiCA is an ambitious attempt to lay down some firm ground rules across the EU for legislation and regulation around cryptos (see CCC 14th & 15th March 2022).

It is a remarkably sensible piece of work, despite various single-issue groups attempting to hijack it with the express purpose of “banning” proof-of-work (POW) coins, a hijack that has so far failed, and long may it continue to do so.

Meandering its way through the trilogue (a consultative process involving the European Council, European Commission, and the European Parliament) there are bound to be some changes along the way.

Circle chief strategy officer Dante Disparte has praised MiCA by saying “Europe’s upcoming crypto-assets policy framework will be to crypto what GDPR was to privacy.”

This is a most worrying statement given that GDPR is a dreadful piece of legislation, poorly thought through, and even more poorly executed. The single biggest benefit to privacy would be scrapping GDPR altogether and replacing it with a streamlined version fit for purpose.

But just because Dante is wrong about GDPR, does not mean he is wrong about MiCA.

Following the Terra fiasco, it is no surprise that European legislators are looking at MiCA and its potential application to stablecoins.

And here we find that potential changes to MiCA could be problematic, or unrealistic, or - more likely - a combination of both.

The first potential change is a fine one – stablecoins will need actual reserves which are legally segregated and fully protected in the event of insolvency, according to Ernest Urtasun, a member of the European Parliament.

This is the exact stance that the CCC has been taking ever since the concept of a stablecoin was invented and is an absolute prerequisite for the long-term viability of any stablecoin.

Unfortunately, the legislators then veer into an Alice type world, insisting that transactions in any one stablecoin cannot exceed EUR 200mm in any one day.

For comparison, Tether (USDT) has daily volumes of $50 billion.

It seems that the daily cap proposed by the EU is a cack-handed attempt to prevent stablecoins existing in the first place and is doomed to fail.

…

Though non-fungible tokens (NFTs) are outside the scope of MiCA, the European Commission will be looking at this element of the crypto world over the next 18 months.

If the approach taken is as sensible as that of MiCA, this is a welcome announcement.

I just wish they could work a bit faster.