European Union Crypto-Asset Regulation: A New Era for Entrepreneurs and Investors

Jānis Ciguzis, Head of the AML and Sanctions Practice Group at BDO Latvia, shares his insights on the new European Union crypto-asset regulation (MiCA), which came into effect on December 30, 2024.

''MiCA represents a significant milestone in the crypto-asset sector, providing clear rules for an industry that has so far been largely unregulated. It introduces a unified approach across the EU, promoting harmonization, investor and consumer protection, and financial stability.

The new regulation aims to mitigate risks related to fraud and money laundering, while also setting stricter requirements for crypto-asset service providers. Companies wishing to offer their services will need to obtain a license, ensuring transparency and trust among market participants. A transition period until June 30, 2025, allows businesses to operate without a license under certain conditions.

MiCA covers a wide range of topics and applies to both token and stablecoin issuers, as well as crypto exchanges, digital wallets, and payment service providers. One of its key benefits is the introduction of a unified licensing system, which will facilitate easier access to the broader European market by eliminating bureaucratic hurdles and differing requirements across member states.

The regulation also addresses the rapid growth of stablecoins, which have previously operated without adequate oversight. Given their potential impact on payment systems and financial stability, new control mechanisms are being introduced to ensure market sustainability and reliability.

Despite its advantages, the MiCA regulation does not address all industry challenges. It does not cover NFTs or decentralized finance (DeFi) platforms, which will remain outside the regulatory framework. Additionally, European companies will need to compete with less regulated markets, such as those in the US and Asia.

Overall, MiCA offers significant benefits, providing greater security and clarity for investors while creating new opportunities for businesses to expand within the EU’s single market. For Latvian businesses, this regulation opens up new prospects, as the country offers relatively attractive licensing conditions, potentially drawing foreign investors and fostering market growth.''

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