top of page
Search

Will MiCA be the MiFID I of Digital Markets and Assets?

MiFID, implemented in 2007, revolutionised European capital markets by increasing competition, transparency, and investor protection. With MiCA (Markets in Crypto-assets) on the horizon, many are asking: Will it do the same for digital markets and assets?

While MiFID focuses on traditional financial instruments, MiCA is tailor-made for the crypto markets. Both, however, share the goal of creating a robust and investor-friendly market. Let's explore the parallels and potential impact of MiCA:


ree

Similarities:


  • Levelling the Playing Field: MiFID I and MiCA aim to foster competition. MiFID I achieved this with its "single passport" regime for investment firms, while MiCA will establish a harmonised regulatory framework for crypto-asset service providers (CASPs) across the EU. This encourages new entrants, leading to lower costs and more investor choices.

  • Shining a Light: Transparency is vital for both regulations. MiFID introduced pre-and post-trade transparency rules, while MiCA mandates disclosures for crypto issuers and CASPs. This empowers investors to make informed decisions and bolsters market integrity.

  • Protecting Investors: Both regulations prioritise investor protection. MiFID I brought rules on best execution, suitability, and conflicts of interest. MiCA builds on this with requirements for CASPs to safeguard client assets, maintain capital reserves, and implement robust risk management.


Key Differences:


  • New Frontier: MiFID I tackled existing capital markets, while MiCA is shaping an entirely new asset class and infrastructure.

  • Tailored Approach: MiCA introduces unique requirements for crypto, such as rules on issuance, white papers, and stablecoin reserves.


MiCA's Potential:


MiCA has the potential to be a game-changer. By promoting a secure and transparent environment, it could:


  • Boost Investor Confidence: Increased regulatory clarity could attract more institutional and retail investors.

  • Drive Innovation: A clear regulatory framework can foster innovation and the development of new crypto products and services.

  • Strengthen the EU's Position: MiCA could position the EU as a global leader in crypto regulation, attracting investment and talent.


Challenges Ahead:


  • Keeping Pace with Change: The crypto market evolves rapidly, and MiCA must adapt.

  • Global Coordination: International cooperation is vital to avoid regulatory arbitrage.


Conclusion:


MiFID I was a catalyst for growth in traditional markets. MiCA has the potential to do the same for digital assets. By creating a more mature and regulated market, MiCA could unlock the potential of crypto in the EU and beyond. While challenges remain, MiCA is a significant step towards a future where digital assets play a central role in the global economy.



 
 

Sign up to be notified about the latest updates of what we think

The posts listed on the 'What we think' webpages are our interpretation of regulatory developments we have been reading about. They should not be considered legal, regulatory or other advice. Contact us if you want to understand the impact of public policy, regulation and governance changes for you.

bottom of page