MiCA: What Europe's New Rules Mean for the Industry? | European Blockchain Convention 9

[Music] production and thank you for my great panelist for being with me on stage today hi everyone my name is tomasi I'm the head of Regulatory Affairs at blockchain for Europe a trade Association based in Brussels and of course we're talking today about the MAA regulation which you may all have heard about uh but today we're trying to explore the regulation this important piece of regulation for the European Union a bit more from the industry perspective at least to try and see what will be the impact of this massive piece of regulation on the blockchain and crypto industry in Europe and I'm very happy to do that today with my fellow panelists I will just maybe you want to all say hi introduce yourself say your name say where you work so I don't have to make any mistakes with your spelling and then we can get started with a few questions Sasha sure I hope yeah it's working perfect uh my name is Asha Maxim I work at revolute as U government Affairs manager so I'm dealing with EU wide policies for revolute uh who doesn't know revolute is a Global Financial super app and we offer uh crypto Services buying selling of crypto plus withdrawals and um deposits hi everyone um my name is Ernest Lima I'm a partner of extra Consulting uh we are a public and a Regulatory Affairs consultancy company specializing in crypto assets uh we work with both the public and the private sectors um and uh prior to that I was a former head of policy at the giala Financial Services Commission where I was first introduced to crypto back in 2016 and I I before that I was a financial services regulatory lawyer yes hello uh I'm n dzo uh um I'm from the ministry of economy in Slovenia but I'm also member of European blockchain partnership um apart from this uh and the European blockchain Services infrastructure and um I I'm involved in some use cases um on the other hand I'm a member of in ADBA government advisory body uh and now uh I'm coordinating a task force for transition um to European digital infrastructure Consortium epic for for um blockchain which will be the first uh real Institution for blockchain in Europe um probably from early 22 to 24 on uh in Europe all right great thank you Nana you can already hear a few of these initiatives and things that are actually happening in Europe thanks to what has been happening at least from the legislative point of view right so the European Union took this important step and now there is of course a lot of new initiatives coming out of that and concrete use cases and examples and it's also interesting I think in our panel we have a bit of the you know the fintech we want to call it industry perspective uh we have of course a public uh perspective the public insute perspective and then of course uh we have aess that is a bit in between you know this uh connection between public and private and how companies can navigate this industry so let's try and understand first of all maybe a general comment let's hear from from Alexandra from revolute what is your overall impression of Mika and what do you think will be the impact for the fintech industry in that case Mika is definitely a great development not only for the industry as uh crypto as a service provider stable coin isers other industry players but also for the Europe as a whole um because I think Europe right now leads by an example where regulation can can actually attract businesses and that clear regulatory environment is something that is needed for for the industry so this is um it's a great milestone and achievement for Europe and and crypto industry in general uh when it comes to the impact for traditional players fintech players crypto as a service providers um I think the main outcome would be we'll have more collaboration because right now without any clear rules we can see that okay some traditional players are a bit skeptical not even about crypto but also about blockchain in general not a lot of traditional finance service players they're um interacting with crypto exchanges um or just generally they don't offer uh crypto services and revet is one of the we're in the minority when we do provide crypto Asset Services and Al also we um wouldn't have any isues with uh crypto deposits withdrawals and transfering of money to other crypto exchanges so this is um a good development when it comes to the collaboration um but I would also like to mention that and point that it's not the happy ending yet it's there's still a lot of work um to be done uh on the crypto asset service provider side uh in the fintech industry for traditional players to fully appreciate U this new segment that were now inevitable part of this whole financial ecosystem um one for instance clear example of what Mika is not touching yet but what it's creating reputational concerns on the traditional Finance side as a fraud issue unfortunately as Banks we see lots of scams happening with crypto and it's not the responsibility of crypto as a service provider to understand it fully there are plenty of examples especially in the UK with uh for instance I think it was the case of a Chase Bank recently that they stopped uh any um transactions to from crypto exchanges for their users and the reason is uh fraud that's happening with crypto so it's still um there's still lot of room for improvements and for further collaboration and I hope that yeah mik is just one great milestone but still lots of things to do and we're happy to be part of um over this Evolution thank you thank you that's uh I think a positive uh you know reaction to of course a very important Milestone as you say but indeed there is a few things to clarify and open questions Ernest what do you think you want to share a bit of uh Insight on what these open questions are with our audience there is a few things that we still not very clear about right yes sure um I I I completely agree with everything that Alexandra has said I I think mik is transformational um it is a a model to follow uh we work with other jurisdictions who are looking at developing their regulatory Frameworks and uh um everyone to date wants us to look at Mika and uh what it what it is that the the legislation says the detail um how how it is framed so um first of all I just wanted to add that that it is it is a a big milestone and uh as a as a major economy um the EU will definitely be followed uh in in many ways by other jurisdictions um in terms of the gaps uh I think there are some uh areas such as defi nfts clearly fall outside scope of of um the regulation um and I think it opens opens it up for interpretation at the moment there is a risk of uh regulatory Arbitrage across the EU with uh National Regulators looking at how they interpret things like defi is it really defi what is what does it mean to be truly decentralized um at xre we look at it as a more like a hybri h hybrid Finance uh high-i uh because inevitably I think there are defi applications that need to um interact with centralized actors um so I think it is important for regulators and international standard setting bodies to try and better understand these type of applications and how they work in practice how they operate with one another what are the interconnectedness between one another to understand how you should regulate them and not jump to try and um come up with a a framework that is very similar to the traditional centralized uh players uh which doesn't really work in in in its entirety yep indeed I think that's a very good point at the end and that's also I think the risk that we saw with regulation coming from the financial services sector where obviously policy makers try to apply existing rules and Frameworks that they know really well that have been applying to traditional Financial players and of course they think that it could be as easy to just transpose those rules to new type of financial services and or other type of Technologies and I think Ernest also mentioned a few of those questions that are still to be answered and these will hopefully be clarified as part of the level two process so we can also maybe mention a bit of that but I think I also want to go turn around now to uh to Nana because Nana you also started mentioning a few things about that that are happening on the side of maika right so it's not just the regulation but the European Union is also putting some political capital on the development of the blockchain sector on the development on a blockchain infrastructure across the European Union so I don't know if you want to share any thoughts on MAA but also maybe I think it could be interesting for our audience to know a bit more about these initiatives and projects you're working on uh yes but now maybe just to reflect okay um I have all the time the Dilemma uh either to to say maybe uh the Europe European commission has done the good job to Define um the framework for financial um digitalization and the the realization of that finan digitalization strategy or they did more problems that that um are coming out from this MAA okay uh now we have in Europe the situation that the financial sector is trying to regulate um certain things also with maika which is okay because it gives us uh some uh legal Clarity legal certainty investor protection um equal St standard that should be uh taken into account when uh licensing registering and so on on the other hand um and we are talking all the time that those regulations are um technology agnostic but on the other hand we all know that which technology is here behind and that is there is another stream uh also in the level of the European commission that is developing the technological approach um developing the European blockchain Services infrastructure which will be the crossborder interoperable and decentralized so it gives us then the the basis the opportunity how to think about to incorporating or integrating those um also decentralized Finance the governance models uh into the blockchain chain technology so what would be the main topic of uh that future blockchain institution in Europe to put all these things together uh to take into account the development of blockchain Technology as such so not only the protocols that are existing uh under Epsy at the moment but also to scale up with the other blockchain infrastructures uh that was also included in digital Europe program uh and foreseen so uh we heard even before in the panels uh we haven't achieved Mass adoption yet yeah but we can achieve Mass adoption also with the integration of um additional blockchain protocols and uh blockchain infrastructures this is the first thing the second thing is we are developing now for 5 years at least three use cases this is that are very important so uh self Sovereign identity we know it's relevant also for the financial uh regulatory framework um to ensure traceability trust in transactions and so on um verifiable credentials uh for diplomas and uh um and social security pass now uh this time we are pumping up traceability uh traceability of diplomas products materials also in connection with the digital product passport and here with all of these steps uh we will create one homogeneous but decentralized uh governed institution uh that will focus also on the research and development and um research and development in in the way uh that we are going to use the solutions from a European blockchain sandbox uh the solutions from um other use cases that can be uh also implemented within European blockchain Services infrastructure but uh also in the way that we Embrace new technologies under web 3 web 4 and the future development uh of the technology I was too long no no that was perfect thank you n also for dropping the web for uh buzzword which if you don't know but that's how the European commission is already calling the virtual words and next generation of uh augmented reality and the convergence of all of these Technologies we still talking about web free the European commission is already much ahead of all of us but I think that that was what n was mentioning is really interesting right so there is on the regulatory front Europe has taken a very important step I think the interest that of course there is in this topic shows that uh this is really something is a milestone something that other jurisdictions are looking at as an example as something that maybe they can take example from or even do better right so that's also considering the global market that we all working in and we're exploring it's obviously very important to have this Global convergence of different regulatory approaches so obviously that's the very important first important point and then on the side of that there is some very concrete initi I atives use cases being developed being launched by the European level across the European member states which I think it could be really interesting for also the industry to look at and take to try and understand and explore how can they be part of this process how can they really be of help in setting up this new framework so thanks a lot for that I think now we'll be interesting though to also talk a bit about the the challenges that we have with the implementation of this regulation so it's interesting because ma of course is meant to be implemented is a regulation we're not going to do European studies 101 now but there is a difference between directives and regulation at European level but rules are supposed to apply homogeneously across the whole European Union but is that going to be the case is there a risk of some national divergencies on approaches licenses authorization looking at you guys I don't know Ernest you want to go first Happ Happ to go first um uh I think there is a a big risk of that uh that that that happening in terms of uh Divergence across the the EU member states you have to remember that um the EU um has an AML framework in place uh all member states do have uh regulation from an AML perspective so you do have a lot of firms that are registered uh from from that point of view um but a lot of jurisdictions have taken very different approaches some are being very proactive with how they are looking at the implementation of MAA others um are being less so um and uh it it will definitely um result in um different different implementation um uh periods uh meaning that by the time that the legislation comes into effect mid next year and at the end of next year um you will have some Regulators that will have a regime that's much closer to m which will facilitate a smoother transition to MAA uh so that's going to be a good selling point for that jurisdiction others will be slower to the Mark um meaning that they're going to benefit from the whole grandfathering period after everything applies um but some are going to struggle with um getting all firms that are currently registered under a an AML framework to be fully authorized andika and you have to remember that the big advantage of being fully authorized is that you will benefit from passport rights um across the EU so if if that is a priority for you and you want to get a good share of the market it's definitely important to consider which jurisdiction you set up now um and start um looking at what you need to do to get fully Meer authorized I think there are a lot of challenges and we could go on uh talking about the level two standards um everything that's coming out of that some of the guidelines uh the difference between a crypto asset and a financial instrument um a lot of new uh requirements such as um the need to have a business continuity plan Disaster Recovery plans a lot of this is new to the crypto asset firms and um there's a steep learning curve for many of them to to comply with the MAA standards so I think there are firms that are being very proactive but others that are I I I see are not doing enough yet to get ready so we would encourage everyone to try and understand what are the requirements and everything else coming out of level two and start start start doing start acting now I would like to add a practical point to this thank you I do agree but I think the most important thing would be to look at the Front Runners so the country that would Implement Mika the fastest with the most capacities and I think most of you know what European country that probably is but uh it's interesting to see whether the situation will be the same as with investment funds and Luxembourg because they were fast they allowed for passporting um yeah they were the first to allow the passporting and now it's a h for investment funds they build the capacities uh firms uh around investment for stting to grow in Luxembourg and I think that with Mika it can also be the case probably not to that extent because already their companies registered in different countries across Europe but we can all already see some Champions um in this game countries that are de okay that we can attract funds we can attract Investments it will be pro-innovation if we build capacities to understand what's coming how to regulate this business and how to offer the best conditions for this business as it's extremely important um when it comes to the implementation not only understanding the rules and I don't know aligning uh National legislation but also having teams uh in the Reg lators able to supervise to communicate um and generally teams that are open um to new players uh for the market so I think in in terms of implementation like let's see how it goes with with the countries because we will see the first three movers and then I think everything is solved decided and the situation is pretty much Clear maybe more European answer okay let let's try to educate uh the national competent authorities uh the national Regulators to act in the same or the similar way uh before MAA we had AML 27 different countries 27 different approaches now we have the opportunity to unify this approach uh to um make uh in all the countries uh implementation rules in the same way so that we can push up the Europe as a whole not not only um from the Champions and the other thing we will have in any case an issue on the competition okay because the traditional institutions will uh face the lack of knowledge here um and the CPS will face the the lack of uh Market here and uh we probably will have the other issues other than um educating The Regulators and integrating the knowledge uh on on this level yeah that's uh that those seems to be very important consideration to keep in mind um but I also want to reassure our audience right and I'm sure there is a lot of people that are also coming from outside of Europe and so they have heard about this MAA regulation they heard about this approach taken by the European Union but now they're probably scared about all of these rules and requirements and licenses that you will have to go through well I think the message that is that should come out of these discussions is that MAA and as we heard now it's all about harmonizing rules across the whole European Union right so before right now we have fragmented rules after MAA will come into Force which is more or less happening on the 1st of January 2025 will be the rules apply uh applicable to everything to all crypto asset service providers and so on at that moment the rules are meant to be across you know the same across the whole European Union which means you get one license in one country and this was mentioned a few times and you're able to passport that license and you're able to provide services to over 500 million people so think again about before saying that Europe is uh not the best place where to establish yourself but this is also interesting from an international perspective I mean we're all happy here we're all very excited and optimistic we have been dealing with mikup maybe a bit too much to still be so optimistic about it but is this optimism being shared is this perspective also being uh you know the same uh outside if you have been engaging with uh you know companies outside jurisdictions Regulators in other places do they all share this uh optimism about the European Union regulatory framework again happy happy to go first um they they do I think in short they they they do um a lot of companies um from from many parts of the world are looking very closely at at at MAA and looking to set up uh in in an EU State um I think there's it's going to be interesting to see what comes out of one of the guidelines around reversal licitation because that may have a big impact on on how Third Country firms uh do business with the EU customers how limiting that would be will will they be following a similar approach to the UK uh that that that would be a risk um for for firms doing a lot of business with EU customers but having said that as you said I think the EU is a major economy there's a lot of customers once you're set up in one place you can passport freely solicit business in in all other jurisdictions that is an incredible Advantage for a major economy that you don't have anywhere else there's a lot of uncertainty in other parts of the world Mika that does bring that legal and Regulatory certainty which is important which is what these uh crypto asset business business are are seeking all the time so I think that yes the answer is yes we we will see we are seeing a lot of firms looking at uh setting up in the EU and that will uh continue to happen over the next year so there's going to be a lot of activity from a private uh business perspective but also from a regulator perspective doing a lot of uh education and making sure that they're ready to regulate this sector n s do you agree yeah I agree definitely um it is called Brussels effect you know oh when we Brussels effect in Brussels but uh it makes some certainty so it's not bad um we can compare this U crossborder uh impact also with the gdpr um with the gdpr we received the the standard uh that is now taken into account in all the other economies now we have maika and the okay maybe not with the first iteration but with the the second or upgraded iteration we will get even more firm standard to be implemented also cross border and it will facilitate it um it will be enabled also on the common crossborder infrastructure and uh um it will enable also the European industry to reach out um the foreign markets so I think it's beneficial Tasha yeah I think as I mentioned very happy about M and again one practical thing is that right now we need to have almost several licenses across Europe because some member states require us to have license to Market our crypto Asset Services actively um and of course Mika is helpful because then you poper in one country and then you can offer a marketer Services across 27 uh member states so we're extremely happy when it comes to crossb um effects and um laws in other jurisdictions we we hope that other countries will take um take the European approach especially concerns the United States and um I think everyone knows that there are some issues with defining crypto Assets in the first place and then not having a clear Frameworks in which you can operate so we're definitely happy um but maybe one point about also Brussels effect n that you mentioned um we're engaging on the international level in consultations on how to regulate uh crypto Asset Services um and we see that a lot of these consultations they copy almost what Europe has already introduced so we already see that this is a benchmark almost for crypto regulation which is a very positive development for us and I think for businesses you work with as well all right thank you so I think there we can conclude here with a few call to actions first of all to policy makers once again to keep talking cooperating educ educating we of course are here for that that's what we as an association do and uh a lot of other uh stakeholders are trying to do um second of all is uh we need to finalize still this MAA framework is still not yet finalized there is a few open questions on defi on nfts on the guidelines to classify crypto assets as crypto assets and so still a few open questions that need to be clarified and then it's really I think the C to action is to The Wider industry you should be looking at Europe as an interesting place where to set up shop it will allow you to access an important Market by just taking again one license in one member State and also an invite I would say to all of you to our audience and to European citizens we do have European elections coming up in in June so it will be important to actually make sure that we go and vote for people that maybe at least understand what this blockchain technology is all about so we're hoping to see that in the next five years there will be a next European commission a new European Parliament they will set up the new legislative priorities for the European Union so it is important that we make sure that all the good work done so far in this last 5 year is not lost and is also followed up by more interesting initiatives to really make Europe an important and Innovative place for these crypto asset markets so with that note I would like to thank my panelists thanks the audience I hope you it was interesting for you thanks again the European blockchain [Applause] convention