Despite being a supporter of the EU’s Markets in Crypto-Assets (MiCA) regulation, Marc Taverner, executive director of blockchain trade body INATBA, warned the draft legislation has some provisions that might unfairly handicap some industry participants.
When the EU published its proposals a year ago, it received a mixed review from the International Association for Trusted Blockchain Applications (INATBA).
MiCA is part of a wide range of policy initiatives that aim to position Europe at the forefront of blockchain innovation.
On the one hand the blockchain trade association agreed with the stated goals of the legislations, saying that “MiCA represents a monumental moment of change for the DLT & blockchain industry globally.”
On the other hand, some members were worried that the legislation, in its current form, might “overburden a young and innovative industry with costly and complex compliance and legal requirements that are disproportionate to the policy objectives it pursues.”
Of particular concern to the members was the perception that unequal treatments might unfairly handicap some industry participants.
INATBA has about 170 members in some 36 countries around the world.
At the time, the trade group acknowledged that it views were preliminary, promising to coordinate with the European Commission, Parliament, and member states for a more detailed review of the legislation.
However, speaking last Friday at the EU Blockchain Summit in Ljubljana, Slovenia, Taverner said that some of his organisation’s concerns still persist.
With MiCa set to lead global policymakers’ efforts to regulate the elusive blockchain technology, Taverner began by commending the EU on its efforts to engage with the cryptos and stablecoins sector.
“A year and a half ago, if you asked people to talk about regulation in crypto, you probably would have struggled because nobody wanted to address the topic. Now we have such a regulation. That’s a good thing.”
Many believe that regulation is the key to ensuring that cryptocurrency adoption has a realistic chance of being achieved. Overall, Taverner said, the proposals struck a good balance between consumer and industrial protection, and carry the benefit of providing regulatory certainty. “Having that certainty, so that there won’t be unpredictable and arbitrary changes, is critical.”
Nonetheless, getting this regulatory framework in place may not solve everything, he noted. “You’re always going to have areas that could be improved upon. Areas that we at INATBA, on behalf of our members, think warrant some further investigation.”
Seeking technology neutrality and a level playing field
One such area is a stipulation in MiCA that already-licensed actors in the field do not need to prove their ability to run as crypto-asset providers, while new market entrants do.
“The new entrants need to gain licensing, they need to prove their ability, they need to prove their systems, their knowledge, their governance structures. They even need to prove the fact that their people are fit to run these services.”
Taverner felt that the exemption granted to existing licensed players is misguided. “We’re dealing here with an industry [blockchain] that is quite unique and requires a certain number of skills.
“I think there needs to be requirements for all licensed players to reach a certain level of competencies, of systems, of safeguards, of governance structures.”
He said this would allow all licensees to demonstrate that they have the ability to provide services in the realm of crypto-assets with the type of responsibility and safeguards “that the public is entitled to expect from them”.
Taverner said another issue that troubles INATBA members is the perceived lack of tech neutrality – an approach that ensures that regulation can be applied indiscriminately to different technologies offering similar services or performing comparable functions, without creating higher hurdles for one technology over another.
“We notice that MiCA has placed a limit on projects that don’t issue white papers of a million euros. This is the ability to raise capital. So, you can raise capital up to a million euros, for example, without issuing a white paper.
“This is great, because it means that innovators can get busy raising c-funds [Common Stock Index Investment Funds], financing their activities, and innovating.”
However, Taverner noted, similar technology platforms that are not blockchain are able to raise up to eight million euros. “That doesn’t exactly provide the type of technology neutrality that we hope will be adhered to across this market of 27 countries.”
A shared effort to reach proportionate rules
With the MiCa proposals expected to come into force by the end of the year, INATBA said an open dialogue with the industry will be key to achieve “a regulatory framework that actively supports the growth of DLT & blockchain to the benefit of all citizens and societies.”
“We find that the Commission, Parliament, and the whole ecosystem working on this have been quite open-minded,” Taverner said.
“They’ve been open to learning, open to receiving evidence, even open, through negotiation, to changing the text in places. Frankly, it’s been quite an enjoyable process.”
There’s a lot to be positive about, he said. “I’m optimistic that, thanks to a lot of people’s hard work and compromise, MiCA will ultimately have a very positive impact on our industry.”