MiCA (Markets in Crypto-Assets Regulation)

The European regulation of cryptocurrencies is currently the focus of numerous debates. Particularly in the spotlight: Malta, which has positioned itself as one of the leading locations for the establishment of crypto companies in recent years. However, the island republic is now being targeted by European supervisory authorities. The reason for this are concerns in connection with the issuing of crypto licences under the new European regulation MiCA (Markets in Crypto-Assets Regulation). The background, motives and possible consequences of this reprimand are analysed in detail below.

What is MiCA?

The MiCA Regulation came into force in June 2023 and is to be fully implemented in all EU member states by 2025. MiCA aims to harmonise the crypto market within the European Union, strengthen investor protection and curb market abuse, money laundering and terrorist financing. Among other things, the regulation governs the authorisation, supervision and obligations of providers of digital assets. Crypto service providers, including trading platforms, wallet providers and issuers of stablecoins, must fulfil strict transparency, capitalisation and governance requirements in future.

Malta as Europe's crypto hub

Malta has already established itself as a European centre for blockchain and crypto companies since 2018 with the introduction of the Virtual Financial Assets Act (VFAA). The Maltese government pursued an innovation-friendly policy that attracted numerous international players. The "Blockchain Island" promoted regulatory clarity, openness to new technologies and efficient licensing procedures. Numerous large exchanges such as Binance and OKEx temporarily settled on the island or utilised the Maltese structures for their expansion into Europe.

The EU authority's criticism

With the entry into force of MiCA, Malta is now under particular scrutiny. According to statements by European supervisory authorities, above all the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), there are concerns regarding transparency and diligence in the granting of licences to crypto service providers. The EU authority accuses Malta of potentially granting MiCA-compliant licences automatically or with only a few adjustments to companies that have received a licence under previous national laws - without the necessary strict reassessment of business models, security measures and ownership structures.

Central accusations

  • Insufficient review of business models: The EU warns that existing licences could be taken over without sufficient review of MiCA compliance. As a result, there is a risk that not all providers will fulfil the European minimum standards for consumer and investor protection.
  • Risk of money laundering and fraud: The supervisory authorities see gaps in the monitoring and enforcement of anti-money laundering guidelines. Malta must make improvements in order to avoid serving as a gateway for dubious providers and money launderers.
  • Regulatory "forum shopping": There are fears that companies are deliberately choosing locations such as Malta in order to benefit from supposedly laxer controls and thus obtain EU-wide authorisation.

Reactions of the Maltese authorities

The Maltese Financial Services Authority (MFSA) has taken note of the criticism and emphasised that it is working closely with European partners. The MFSA promises to strictly implement all MiCA requirements and to subject existing licences to a comprehensive review. Nevertheless, Malta defends the previous approaches as being conducive to innovation and points out that no other EU country has introduced crypto regulation as early and consistently as Malta itself.

Impact on the crypto industry

The EU authority's reprimand has far-reaching consequences for companies and investors:

  • Uncertainty among providers: Crypto companies must expect stricter audits and possible delays in the granting of licences.
  • Higher administrative costs: Companies are confronted with additional documentation and verification obligations.
  • Potential migration: If Malta tightens the requirements and the locational advantage diminishes, companies could choose other countries as a base.
  • Strengthening consumer protection: In the long term, the harmonisation of standards within the EU is expected to improve customer protection and strengthen trust in the sector.

International perspective

The discussion about Malta is part of a global debate about the right balance between innovation and regulation in the crypto sector. While countries such as the USA and the UK have not yet established standardised crypto regulations, the EU wants to play a pioneering role with MiCA. Malta will be the test case for whether new rules can actually be applied consistently and seamlessly.

The EU authority's reprimand of Malta is a wake-up call for all crypto locations in Europe. It shows that an innovation-friendly policy must not come at the expense of transparency and security. Only with strict audits, clear standards and consistent implementation of the MiCA regulation can trust in the European crypto market be secured in the long term. Malta now faces the challenge of combining its pioneering role with compliance with strict European rules in order to remain an attractive but secure location for crypto companies.

However, it is also an ambitious fallacy for a European regulatory authority to presume that it can really influence the crypto market worldwide and assume that EU regulations will simply be adopted without further ado. On the contrary, the EU plays into the hands of locations such as the Seychelles, Shanghai or Singapore.

In times of VPN and global free internet, it is up to the crypto user to decide how, when and where, under which conditions he sees his interests fulfilled.

Nothing against the honourable goals of the EU, but protection is only granted to those who continue to invest their money in a fixed-term deposit account at a suitable bank.