Reflections on Europe’s Markets in Crypto-Assets Framework (MiCA)

Europe’s upcoming crypto-assets policy framework will be to crypto what GDPR was to privacy.  Setting a harmonized policy and regulatory standard for something as fundamental to the future of crypto-assets in the third largest economic zone in the world is a significant milestone.  While no comprehensive body of rules is perfect, especially not one as far reaching as MiCA, it nonetheless provides practical solutions to issues that other jurisdictions are just beginning to grapple with.  Namely, a harmonized, comprehensive framework, across an entire region, that gives market participants regulatory clarity -- something they have long asked for -- and crypto end-users key protections and market-wide assurances -- something they need.

This policy framework was not borne in a vacuum, but rather as a studied pan-European market response to the emergence of potentially systemic crypto-asset and stablecoin innovations.  The speed and calamitous meltdown of the algorithmic stable-in-name-only coin, Terra (what can only be described as crypto financial alchemy), is vindicating to regulators who have warned of unmitigated risk in crypto.  At the same time, the geopolitical, strategic and economic competitiveness implications of safe, always-on device-centric banking and financial services that enable a technology-powered global economy, vindicates responsible investors, companies and technologists.

Responsible players are surviving nothing short of a major system stress test in crypto markets (more complex than 2018), proving how sound business models and a pro-regulation approach can win the day.  Indeed, the presence of well-regulated market alternatives like USDC, have not only given markets a flight to trust and quality option amid crypto-asset turmoil - growing to 55 billion in circulation - it has also helped to shield prudential regulators from the prospect of bailouts by shoring up the broader crypto economy.

What Europe’s policy makers have called for in response to these concerns may on the surface seem onerous and anti-innovation to MiCA’s detractors, but deeper down it offers a pathway for Europe to emerge as a competitive region for the safe, sound development of an always-on financial system.  For one, conforming with existing e-money frameworks, as well as clear crypto-asset token classifications, something that has remained elusive around the world, sets the stage for broader market adoption across Europe. Circle plans to continue to invest in and grow its presence in Europe to help build this responsible, MiCA-conforming crypto-asset economy.

Licensing passporting rights and the avoidance of the harmful race to the bottom of regulatory arbitrage can only be a net benefit for companies and consumers, which can improve Europe’s attractiveness for the time, talent and treasure that are building the industries of the future. Even typically conservative central bankers are acknowledging how firms that survive this particularly frosty crypto winter, will be the Amazons of the future. As pioneers of open banking, technological portability and individual privacy, Europe may also do the most of any region in the world in developing a “financial services trusted traveler program,” which will be anchored in self-hosted wallets – the key attribute that helps keep the internet of value open and universally accessible.  This is a uniquely European and western ideal and perhaps the technological contest of our times.

Courtesy of emerging pan-European regulatory certainty, the ability to build these Web3 firms natively in Europe, while attracting investments from abroad, is being secured. Just as the dollar-backed crypto economy powered by USDC has anchored a vibrant industry in the United States and around the world, a well-regulated euro-backed digital currency, like Circle’s Euro Coin (EUROC), is a key pillar for responsible financial services innovation - and a key trading pair for USDC.  We aim to make the initial launch of Euro Coin another example of the trust, transparency, accountability and pro-regulation approach that has made USDC the world’s 4th largest digital asset in circulation and helped secure the U.S. dollar's place as the currency of the internet.

We also aim to make Euro Coin a MiCA-conforming digital currency, for which our ongoing engagement with European stakeholders, regulators and policy makers, as well as our direct investments in Europe, are key bridges to the future.