A recent study published by the European Parliament has sparked controversy, as it appears to challenge the rationale for the EU’s new crypto laws. The study, conducted by a panel of academics, argues that crypto should be treated by default under a more heavy-handed regime designed for traditional stocks and bonds. “Regulators need to act soon to control the kind of bad behavior that has been revealed of late,” the authors say, “and they worry the bloc’s much heralded Markets in Crypto Assets regulation, MiCA, has so many loopholes that it will offer few benefits, and could create a regulatory vacuum.”
The debate over crypto’s legal status is particularly thorny in the U.S., with the SEC claiming that a range of tokens for blockchains including Solana (SOL), Cardano (ADA), and Polygon (MATIC) do fall under its jurisdiction. However, Francesco Paolo Patti, an associate professor at Bocconi University in Italy, believes that the study is flawed and that MiCA “makes clear that crypto is special.” He argues that classifying crypto as traditional financial instruments could obstruct MiCA’s goal of having a single license to trade across the bloc.
Dirk Zetzsche, a professor of financial law at the University of Luxembourg and one of the study’s authors, believes that traditional finance rules are needed as a safety net. He worries that there could be a regulatory free-for-all under MiCA, and that smaller jurisdictions simply won’t bother to probe or verify information. “It is about crowding out the criminals and ignorant, and leaving the pros in the game,” he said.
Under MiCA, issuers for crypto get a lighter touch, which has won plaudits from the industry. Christian Steiner, head of regulatory affairs at crypto exchange Bitpanda, said that “dedicated rules are the only way to regulate crypto.” Gerry Cross, director of financial regulation, policy and risk at the Central Bank of Ireland, has raised concerns about how MiCA might play out in practice, calling for the EU’s banking authority to set up a new mechanism to coordinate crypto applications.
Though the text is nailed down, Francesco Paolo Patti believes that it shouldn’t be innovative startups hoping to launch a new business idea who pay the price. “It is therefore better to help the national competent authorities with clear standards, instead of claiming that everything is a security by default,” he said.