The European Union’s 27 member states are getting ready to enforce its landmark crypto laws this year – and businesses looking to operate in the bloc should be watching what national authorities are doing, policy watchers say.
In a few months, the Markets in Crypto Asset (MiCA) regulation’s specialized rules for stablecoin issuers will take effect, followed by licensing and other requirements for crypto firms broadly in December.
MiCA was voted into law in 2023 after the European governments spent three years developing the regulatory framework. Once effective, crypto firms, such as issuers, exchanges and wallet providers, will be able to operate throughout the European Union if they secure licensing in any single member nation.
That means each jurisdiction must transpose the bloc-wide EU regulation into local law, select which of their regulators will oversee crypto and prepare to authorize token issuers and other service providers.
For some EU countries – such as Germany, France and others – that chose to regulate crypto internally through strict regimes, transitioning to the MiCA age may not be a big shift. For some other countries, the change may be significant and place new burdens on local authorities.
CoinDesk reached out to regulators and government ministries in all 27 nations on their thoughts and progress on MiCA, 20 of whom responded by press time. These countries are in various stages of preparation.
At least 10 countries are finalizing or have already finalized local legislation. Some others are not quite as far ahead yet, but experts say there is time to get things in order.
MiCA is an EU-wide regulation, which means it takes direct effect across the bloc on the agreed deadlines, said Sophie Lessar, partner at law firm DLA Piper, focusing on fintech and digital financial services.
“The rules will come into effect. There's nothing that any regulator will do to hold that up,” she said during an interview with CoinDesk.
However, there are some technical requirements that have to be implemented at a national level, Lessar added.
While national authorities decide how they want to implement some of the more flexible technical standards under MiCA – such as how long their grandfathering periods will last or what their supervision fee structure would look like – crypto businesses, too, should be preparing for compliance and be aware of nuances in implementation at the national level.
“The key thing is for people to navigate, what does that mean for my business? Where am I doing business? Are there any differences where there is the ability under MiCA for the national authorities to have slight differences in implementation?” Lessar said.
Picking watchdogs
European countries are in various stages of transposing MiCA into local law, which can involve deciding on the local regulators who will be at the helm of supervising crypto – referred to as National Competent Authorities (NCA) in the MiCA text – as well as deciding on whether to take advantage of a transitional period allowed under the regime.
With MiCA, there was an expectation that local supervision duties might be divvied up between a country’s markets regulator and its central bank (to handle stablecoins), according to Marina Markezic, co-founder of the European Crypto Initiative (EUCI), which has been tracking the progression of national legislation.
France, for instance, has designated its financial regulator, the Autorité des marchés financiers (AMF) and banking authority, the Autorité de contrôle prudentiel et de résolution, as its MiCA supervisors under France’s Article 9 of Law no. 2023-171 of March 9, 2023, the AMF told CoinDesk.
The AMF told CoinDesk that it’s now working to align requirements in its existing regulation for digital asset service providers with authorization requirements under MiCA.
Read more: France Steps Closer to Implementing MiCA for Crypto Firms
Croatia is aiming for a similar setup where, once the national legislation is adopted, MiCA duties will be split between the Croatian National Bank and financial regulator Hanfa, the latter told CoinDesk.
“Hanfa will license and supervise the operations of crypto-assets service providers… However, as per MICA requirements, Hanfa will not approve crypto asset white papers,” the regulator said in a statement.
Some countries, such as Slovakia and Hungary, don’t have two financial regulators so crypto supervision will fall solely to their central banks, Markezic said. Hungary’s central bank MNB confirmed to CoinDesk that it was designated as the country’s crypto regulator through its national MiCA legislation.
Although this is more of an organizational matter, there could be room for regulators to be overburdened with licensing requirements.
Rosvaldas Krušna, adviser to the Board of the Bank of Lithuania, said that the new need for crypto firms to be approved “will bring significant challenges” to the central bank, which will be handling licensing.
“Given the fact that we have around 580 [crypto asset service providers] in Lithuania, the Bank of Lithuania initiated preparations well in advance, and we believe we are rather well prepared,” Krušna said. “We have put a lot of resources into preparation, both in terms of additional staff and tools required for supervision.”
Slovakia may not have a large enough financial market to warrant a second regulatory body, according to Policy Expert Anja Blaj at EUCI.
“This also is kind of related to the overall, I would say, fragmentation in the way that European Union member states operate and the difference in the financial markets,” Blaj continued. “Because that is still something that is very member-state specific, even though we have many regulations, or much more regulations will be coming in this space, it's still very much specific to the member state.”
Blaj and the EUCI team, who have been speaking with industry representatives in member states, say that each country’s crypto industry has its own concerns about implementation, proposed laws and who their NCAs are going to be.
National legislation
Austria, Estonia, Denmark and Croatia are among the countries whose parliaments still need to approve draft national legislation to align with MiCA, according to what regulators told CoinDesk.
”The Danish Parliament is currently in the process of adopting national legislation that will mandate the Danish Financial Supervisory Authority (DFSA) to become the national competent authority with regards to MiCA in Denmark. This is expected to be adopted during the spring,” said Tobias Thygesen, head of the DFSA's Fintech, Payment Services and Governance Division.
Croatia plans to adopt legislation implementing MiCA rules In the second half of 2024, the country’s financial regulator Hanfa told CoinDesk, while Portugal’s central bank said that the country has yet to designate a national competent authority.
Other nations such as Ireland, Slovenia, Poland and Lithuania have consulted publicly on draft legislation, CoinDesk was told by respective authorities in the country.
Regulators in Belgium, Bulgaria, Greece, Malta, Romania, Slovakia and Sweden did not respond by press time, while those in Italy and the Czech Republic declined to comment.
Read more: Italy Setting Up Crypto Environment That Meets EU's New Laws, Central Bank Governor Says
Grandfathering
One area where nations can diverge in the implementation of MiCA is with their grandfathering period, or the time crypto firms are allowed to continue operating under old rules while transitioning to the new regime, Lessar said.
Crypto firms would need to navigate carefully between diverging transitional periods when beginning operations in the EU, she added.
While MiCA allows nations an optional 18-month transitional period, the EU’s markets watchdog has since called for limiting that to 12 months.
Spain's financial regulator, the National Securities Market Commission (CNMV), told CoinDesk that the country will apply a 12-month grandfathering period in which MiCA-authorized crypto firms and unauthorized ones will operate “at the same time.”
“This will be a relevant challenge for NCAs,” the CNMV said, adding that regulators will have to make a “big” effort to make the distinction clear to users. In preparation, the CNMV said it’s planning to hire 70 people to work on MiCA and the EU’s cybersecurity law known as DORA.
Finland hasn’t yet decided whether it will implement the transition period for crypto firms registered in the country because it is still preparing the national legislation, the country’s financial regulator FIN-FSA told CoinDesk.
“The legislative proposal must be passed by the Finnish parliament. The expectation is that the national legislation is adopted during [the first half of] 2024 still,” Elina Pesonen, market supervisor at FIN-FSA told CoinDesk in a statement.
Latvia’s central bank, Latvijas Banka, is planning to start the licensing process and accept applications on Jan. 1, 2025, after a six-month grandfathering period, Marine Krasovska, head of the bank’s financial technology supervision department, told CoinDesk. To make the process easier, it will pre-evaluate crypto firms interested in operating in the country, she added.
Dutch financial regulator AFM told CoinDesk that it has started accepting licensing applications from crypto firms starting April 22, 2024. If approved, the licenses will kick into effect when MiCA does on Dec. 30, 2024. The country’s central bank (DNB) will be handling stablecoin regulation, the AFM said.
From what Croatia’s Hanfa told CoinDesk, it might make use of the full 18 months of grandfathering.
“Based on the current draft law, all those listed in the Register (as at the end of 2024) will be able to use the MiCA transitional period for adjustment (up to June 2026) by the end of which they will have to align their operations and obtain a MiCA authorization from Hanfa to operate as crypto-asset service providers. Entities that did not provide crypto-asset services prior to the end of 2024, and want to start doing so after that date, will have to be licensed before they can provide such services,” Hanfa said.
Looking ahead
Regulators that are licensing crypto firms for the first time are expecting an increased workload, and just as Spain’s CNMV is planning to hire new personnel, other regulators are also beefing up their teams or getting them the training needed to handle what’s coming.
“National competent authorities are already working hard to accommodate their capabilities and workforces to it,” Spain’s CNMV said.
Denmark’s DFSA will be accepting applications from companies as soon as the country finalizes national legislation, and the regulator has set up a “dedicated MiCA team responsible for the implementation,” Thygesen said.
“With the objective to effectively tackle the challenges posed by MiCA, the MNB has adopted multiple organizational changes and established a dedicated directorate focusing on MiCA related matters,” Hungary’s crypto regulator said.
Under MiCA, countries have a say in setting fee structures for licensing and compliance, said the EUCI's Markezic, which would hopefully be more conducive to attracting and promoting businesses in the EU than deterring.
“Member states are pretty sovereign when it comes to their own financial markets. And they are their own markets, which means that they also, in a way, act in terms of like, 'okay, I want now to have as many projects as possible coming to my ecosystem, because I have the ecosystem that can support it. And this is how I'm also competitive, in a way, competing with other members,'” Markezic said.
Meanwhile, several regulators, including France’s AMF, told CoinDesk that they are also working with the EU’s markets regulator (ESMA) and banking authority (EBA) as they consult on technical standards under MiCA.
ESMA's Executive Director Verena Ross described to CoinDesk the regulator's role in implementing MiCA as bringing more detailed guidance to the market and bringing the regulators together.
It's looking at June as an initial deadline for regulatory technical standards and guidance for public comments, with the end of the year as a deadline for finalization.
Policymakers in the EU are already thinking of revisions to MiCA that could see its scope expanded and certain rules tightened.
“MiCA is an important first step towards the regulation of cryptoasset services and their providers,” German crypto regulator BaFin told CoinDesk in a written statement. “It also provides for the further development of regulatory requirements, for example with regard to pooling, lending and staking, i.e. loaning cryptoassets for a fee. BaFin will play an active role in this process.”
Enforcement-wise, things largely seem to be moving along as they should be.
“So far the delegated acts and implementing rules are on track. Also, bear in mind that it is only the ‘stablecoin’ provisions (titles 3 and 4) of MiCA that kick in end of June,” Peter Kerstens, adviser to the European Commission on financial sector digitalization and cybersecurity, said in a statement to CoinDesk.
The rest is “a full summer and a full autumn and even some of winter away,” he added.
Edited by Nikhilesh De.