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When the Markets in Crypto-Assets Regulation (MiCA) was officially signed into law in June 2023, it marked a significant milestone for twenty-seven countries. This legislation, which covers nearly twenty percent of the global economy, is just the beginning of a transition period lasting twelve to eighteen months. The European Securities and Markets Authorities have highlighted the need for the development and refinement of a substantial number of Level 2 and Level 3 measures within MiCA.
Looking ahead to 2024, the European Union will begin the process of implementing MiCA, followed by collaborative efforts to enhance its international impact. This includes EU financial institutions seeking qualified sub-custodians. The goal is to establish a unified framework for all EU jurisdictions, eliminating the need for separate licenses in each country. However, unique characteristics of individual countries will still need to be navigated, such as addressing specific KYC and AML requirements when conducting cross-border transactions.
The year ahead will be focused on governments finalizing details, completing paperwork, and engaging with various stakeholders. With the introduction of MiCA, there is no precedent to fall back on, requiring a learning curve for all involved. Companies that proactively prepare in 2024 are likely to have a smoother transition and benefit from the opportunities presented by MiCA.
The approval of spot Bitcoin ETFs across Europe is anticipated in 2024, initially for institutions and later for retail investors. The current bull market trend increases the likelihood of swift approval, driven by high trading volumes and the desire to capitalize on financial opportunities. The seamless adoption of new digital asset products is expected among the tech-savvy generation.
Following the implementation of MiCA, customized agreements may emerge to facilitate increased participation in financial markets. Bilateral agreements with the EU could enable smaller entities to leverage the benefits of MiCA, such as smaller banks in Switzerland seeking collaboration opportunities.
As MiCA becomes operational, Europe is poised to contribute to international standards for AML/CFT regulations. The alignment of rules and regulations across different jurisdictions can streamline processes and enhance regulatory clarity. While global standardization may not be fully achieved, providing clear guidelines and processes will support the growth of the crypto industry.
With the introduction of MiCA, banks and asset managers in the EU can apply for a crypto custody license. However, many financial institutions may opt for sub-custodians to manage digital assets due to the associated responsibilities and technical expertise required. Selecting a reputable custodian can ensure the safekeeping of digital assets and segregation of functions.
Navigating the complexities of MiCA implementation will involve various decisions for stakeholders. Sven Mohle, Managing Director of BitGo Europe GmbH, brings over 25 years of experience in financial services and sales to the table. His expertise in markets, operations, products, and cold storage positions him well to guide organizations through the evolving landscape of crypto regulations.