A leaked version of the European Union’s regulation on crypto-asset markets – better known as MiCA – has met with mixed reception.
MiCA will introduce the European passport for crypto companies, which means that a license obtained in an EU jurisdiction will be valid in all other member states.
But some EU countries already have their own crypto regulations, among them Germany and Estonia. Companies registered in these countries must comply with their local regulatory requirements, which may be much more stringent than those outlined in MiCA.
In EU countries without a crypto regulatory framework, meeting MiCA’s minimum requirements would automatically grant that company access to member countries with stricter rules, potentially lowering the bar for crypto businesses across the EU. ‘Europe.
Speaking at the recent Nordic Fintech Week 2022, Marcus Mølleskov, head of risk and compliance at crypto payments firm Januar, said there were reasons for optimism about the “passport” mechanism. from the EU, as it would open the door for crypto companies to the whole of Europe.
Currently, businesses have to go through the cumbersome registration process in each separate member state to gain access to other EU countries.
But some in the crypto world feel that the planned regulations in the EU and elsewhere only entrench autocracy in an ecosystem born out of rebellion.
What happens when regulations are disconnected from reality?
During the stock market crash of 2007-2008, the series of regulations that arose in all jurisdictions were not fully aligned.
“It’s been good business for consultancies,” regulatory expert Targ Patience told Moneyweb. Indeed, it required someone with in-depth knowledge of each jurisdiction to ensure that a financial firm was in compliance.
To do better in crypto, says Patience, any eventual regulation should be a collaborative effort.
SA’s upcoming regulations could be much worse
Kuben Naidoo, Deputy Governor of the Reserve Bank of South Africa (Sarb), recently announced that the Sarb will introduce crypto regulations within the next 12-18 months.
Crypto Regulation Could Be 12-18 Months Away
Imminent crypto regulation in South Africa
Unfortunately, the Sarb intends to impose exchange controls on crypto trading, which could chain this new form of digital value to Stone Age inefficiency.
When Nelson Mandela opened parliament in 1996, he said: “For us it is not a question of if, but of when these [exchange] controls will be phased out.
And yet here we are, nearly 30 years later, still forcing South Africans to spend a depreciating currency within South African borders.
And now the same is for crypto.
Regulation is necessary, but must be in good hands
That regulations are coming for crypto is a given. For all the Bitcoin White Paper hope to create a financial ecosystem separate from central authorities, the nature of the world makes this impossible.
Once value begins to be exchanged, bad things can happen to good people.
Crypto – just like fiat currency did – can be used to finance prostitution, drug trafficking, arms sales, terrorism, and any illicit activity.
Crypto can be stolen just like rands and US dollars can be stolen. Without a regulatory framework to curb this, innocent people risk losing their money.
The concern of the crypto community – whether in the Nordic countries, in Europe or in South Africa – is that these inescapable regulations take on the air of a teacher pointing their cane at children who dare to experiment in science class.
Regulation at the expense of innovation could spell disaster for the crypto industry. And regulation shouldn’t be created by people who don’t understand the technical side of crypto.
For example, the blacklisting of the Tornado Cash mixer in the United States and the subsequent arrest of its developer Alexey Pertsev sent the crypto world into turmoil. And rightly so.
That Tornado Cash was tasked with facilitating the transfer of millions of dollars in illicit funds is correct, just as incumbent banks have been used to launder funds for the same thing for decades. But crypto mixers such as Tornado Cash – tools that enable crypto flow obfuscation – have also valid use casessuch as whistleblowers, keeping donations to charities anonymous, and even offering dissidents a way to send funds to a cause without fear of persecution.
Gibralter is right
Gibraltar serves as a model of how crypto regulation can be done well – collaboratively between regulators and stakeholders.
The success of crypto companies in this jurisdiction speaks for itself, with major players such as Huobi and Bullish calling it home. Even Binance was would have consider moving there.
The result is that 25% of the territory’s GDP comes from cryptocurrency companies.
A similar success in South Africa could even help bring the rand back to its previous highs – provided exchange controls are lifted so that foreign crypto companies have fewer restrictions when investing in the country.
Listen: FSCA’s Brandon Topham tells Ciaran Ryan that a key focus of SA’s crypto regulation will be to hunt down scammers:
*R Paulo Delgado is a crypto writer with an eye for the bizarre, human stories behind the always fascinating leaps and stumbles of this new asset class.