In 2024, the European Union will become the first major jurisdiction in the world to officially adopt comprehensive laws and regulations for the cryptocurrency sector.
There has been a lot of talk about the introduction of crypto-assets into the regulated market, or MiCA for short. The new system establishes harmonized rules for crypto-assets at EU level, providing legal certainty for cryptocurrencies that are not covered by existing EU financial services legislation.
Ultimately, this is intended to enhance consumer and investor protection and financial stability, thereby promoting innovation and the use of crypto-assets.
But what will be the real impact? Is it as transformative as it was done?
I'm a really optimistic person. In my opinion, the MiCA regulations are intended to revolutionize the cryptocurrency landscape by providing individuals and companies with a framework for conducting crypto transactions with clear guidance on taxation and accounting.
Clarity means a lot in this business. With the clarity that MiCA brings to all stakeholders, I hope that cryptocurrency adoption will increase, whether it is among people who want to diversify their assets or companies that run Web3 applications and accept payments from their clients and customers in cryptocurrencies. Both will go hand in hand. As more and more people own cryptocurrencies, companies and banks will look to make it easier to use them to purchase products and services. Additionally, I believe that the increase in verified exchanges will also have a positive impact on the use of cryptocurrency as it will help increase trust in the system.
What does MiCA mean for data protection?
As with most new regulatory frameworks and policy announcements, there are some important caveats. It is true that MiCA should not be seen as a panacea that will create a perfect crypto-ecosystem within the jurisdiction of the EU.
The biggest issue that remains is privacy. There are ongoing and legitimate challenges that need to be addressed in the near future in adapting to the MCA regime. Despite a clear regulatory framework and security benefits, and a clear set of rules to follow, questions remain about how data protection can be guaranteed. As we enter 2024, there is a need for continued attention to addressing potential (and other) privacy gaps related to crypto-assets.
As banks increase their commitment to cryptocurrency, they will look to public blockchains for operational efficiency. Although these public blockchains are equipped with privacy features, this is a significant change from the current situation where many banks make private blockchains the most secure option in cyberspace.
However, this approach is expensive and lacks interoperability, causing problems with potential mergers and widespread adoption of cryptocurrency-based activities.
Currently, the financial landscape and presence in the tokenized securities space is characterized by the fact that banks and other organizations in the industry operate separately; a situation that stems from the benefits of a private blockchain.
However, what we are seeing now is a growing desire for engagement. In the near future, this will also include greater use of bridge-driven features. In the next stage of evolution, things get more and more interesting. As the adoption of cryptocurrency assets expands, banks will be more eager to adopt a one-size-fits-all approach – a public blockchain that balances the key elements of transparency and privacy.
However, I do not expect the next phase to begin in 2024. Instead, there may be several pilot projects aimed at implementing some kind of universal blockchain by the end of 2024. The financial sector has been slow in the past, but even the brightest technological minds are sure to pilot the next phase.
What to expect in 2024?
The implementation of the MiCA rules coincided with the gathering strength of a wider global movement. In 2024, I expect an increase in transactional pilots, primarily to increase cryptocurrency adoption and then to explore the possibility of truly interoperable blockchain systems.
The key to significant cryptocurrency growth in 2024 is building trust. When we look at markets such as the United Arab Emirates and Singapore, we see strong examples of already progressive regulatory environments and potential candidates for adopting trust-building approaches in the future.
Even smaller European markets are trying to gain an edge over larger countries such as the United States – Switzerland and Luxembourg, for example, are heavily involved in the burgeoning cryptocurrency world.
Everywhere we look, transformative change seems imminent in the financial sector. In the EU, the MiCA regulations should serve as a catalyst for cryptocurrency adoption and innovation, while setting an example for other regions and markets.