MiCA: The good, the bad and the ugly of the EU’s crypto rules

Published

2 years ago

August 30, 2023

admin

While United States regulators such as Securities and Exchange Commission Chair Gary Gensler make bad-faith claims that “there’s been clarity for years” when it comes to cryptocurrency, the European Union took real action in April when it passed the Markets in Crypto-Assets (MiCA) regulatory framework. While imperfect, it was a crucial move in the right direction for our industry and a signal to the U.S. that it will be left behind if it continues to stand still and rely on antiquated regulations.

Similar to how Bitcoin (BTC) took old technological, economic and financial concepts to build something new, regulators must rework existing regulatory and financial security frameworks to create a successful environment for participants. There are many useful and valid elements in our existing financial and regulatory frameworks.

On the other hand, there are many problems with the blockchain industry that the traditional regulatory framework does not address sufficiently — this leads to frustration and wasted resources as lawyers bicker over potential interpretations of statements instead of abiding by clearly defined legislation.

While Web3’s practical applications have shown great potential, it remains a remix of this traditional financial system — albeit a remix dedicated to improving efficiency, openness and fairness for all participants.

MiCA: A necessary but mediocre step forward for regulation

Despite the complex language around financial and securities regulations, the situation is really more simple than it appears. In short, our regulations attempt to prevent people from doing bad things to other people. Examples could include terrorists sending or receiving money to facilitate acts of terrorism or fraudsters making fraudulent claims to investors. It also includes ensuring that licensed individuals and entities are held accountable to a set of operating standards developed over the history of our modern financial markets.

In the more technical sense, the laws governing these operating standards are:

Anti-Money Laundering and Counter-Terrorist Financing laws
Securities and commodities laws
Market infrastructure regulation

Despite the SEC’s insistence that existing regulations cover these three issues broadly, many elements manage to fall through the cracks of these roughly 100-year-old definitions, rules and penalties. We can largely attribute that problem to two things.

One is the categorization of digital assets. Are they commodities or securities, or do they fall under an entirely new category? Digital tokens often exhibit characteristics of one, both or neither, creating a significant dilemma for existing frameworks.

*An overview of MiCA’s key points. Source: Circle*

The second is that the pace of innovation far outstrips the rate at which slow and sophisticated traditional finance regulatory frameworks can adapt. Governments have the responsibility of establishing regulations that are robust enough to prevent misconduct and protect stakeholders, yet flexible enough to accommodate the advancements promised by this burgeoning industry. How are these authorities supposed to compete with a smart contract that can be deployed in minutes and then upgraded that same day to have a completely different set of logic and parameters?

To those of us in this fast-moving industry, it is glaringly obvious that we need new regulations and guidelines that are compatible with the unique benefits and challenges Web3 offers.

MiCA constitutes one promising attempt, though the framework will struggle as the individual member-states of the EU test the framework in their native courts and build a patchwork example of cases with varied outcomes. That being said, here’s the good, the bad and the ugly of MiCA.

MiCA: The good

The best part of MiCA? Tighter rules and larger punishments for crypto asset service providers who lose customer funds! This is a longstanding issue within crypto where the exchanges and wallets have no liability when they are hacked or compromised and lose users’ funds, and has led to tens of billions of dollars lost with no options for users. This is unacceptable and has directly contributed to many individuals being irrevocably destroyed in our industry by bad actors.

MiCA: The bad

Although it states a primary goal of preventing market manipulation, the majority of manipulation is happening outside of the EU (via offshore entities), so it doesn’t really help many people directly. It may help indirectly, though, as it signals to the market the direction regulators are moving toward — though this also depends on the punishments levied when cases come to a judge.

Noticeably excluded are decentralized finance and future central bank digital currencies. Although it might be seen as a positive that DeFi is not included, the vast majority of on-chain transactions and activity are DeFi, and it is frustrating that this was skipped.

MiCA: The ugly

Unfortunately, there are many concerning or otherwise “ugly” elements present in MiCA that readers must be aware of, and not only if they’re EU citizens.

The “Travel Rule” greatly increased the surveillance and recording of financial transactions and online activity in an unprecedented manner by forcing service providers to identify the recipient as well as the sender for every transaction.
A very low threshold of 1,000 euros for reporting leads to increased surveillance, as compared with the traditional threshold of $10,000 in the United States for banks. It’s irritating to have regular people be subjected to these Orwellian levels of scrutiny, given that the vast majority of financial malfeasance is done by larger banks and institutions via money laundering and other fraudulent activities.
It requires official approval from lawmakers before launching tokens or liquidity. This will dramatically stifle the number of legitimate projects launched within the EU, both directly and indirectly. It’s hard to assume that the queues will be short and the process expeditious — governments have proven time and time again that they are slow and inefficient, especially where new technologies are concerned.

There’s another core problem inherent in any regulation by the European Union that bears repeating: The fragmented nature of the EU’s court system makes it difficult to draw meaningful conclusions about the impact of individual future rulings. In short, this is a minor win for Web3 and requires much more work around the world by regulators.

This is in stark contrast to the U.S. court system, which is — traditionally, albeit not with Web3 — a unified and solid foundation of legal rulings. A fragmented series of rulings makes it very unlikely that other countries will really follow MiCA full-steam ahead; instead, they will likely wait for the U.S. to come out with its own substantial framework and regulatory guidelines.

Regulators, exchange operators and founders all say that until the U.S. has a substantial set of regulatory guidelines, they will be proceeding very cautiously and slowly. Although they may take some inspiration from MiCA, it is not the North Star they need.

The blockchain industry is at a crossroads, for both regulators and users. Countless individuals have had their life savings ruined by fraud and scams, while regulators have struggled to keep up with the rapid pace of innovation in the industry.

Mike Sarvodaya is the founder of the Galactica Network, a layer-1 protocol that leverages zero-knowledge cryptography to achieve Sybil resistance, compliant privacy and infuse robust reputation primitives into DeFi and DAOs. He graduated first in his class from Utrecht University with an MsC in financial econometrics. Before Galactica, he spent the majority of his career as a risk manager and analyst at global hedge funds focused on proprietary trading in currencies, stocks, commodities, and digital assets.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Politics

Starmer and other leaders have fallen into line on Trump’s Gaza plan – now it must deliver

Published

6 hours ago

October 13, 2025

admin

Starmer and other leaders have fallen into line on Trump's Gaza plan - now it must deliver

I’ve been around a while and seen a lot of the insides of international summits over the years, but this one was truly extraordinary.

Over 20 leaders flew to Sharm el-Sheikh in Egypt from all over the world – Indonesia, Pakistan, Norway, Canada – to witness the signing of Donald Trump’s peace plan.

Gaza deal signed – as it happened

This historic day was pure theatre for Trump from start to finish. Flying in from Israel, where he had met hostage families and then addressed the Israeli parliament, he arrived a whopping three hours late, keeping a gaggle of world leaders waiting.

We stood around in corridors watching them move from one room to another to hold meetings with each other, presumably to talk about phase two of Trump’s peace deal.

Testimony to the power of Trump

At one point, Sir Keir Starmer’s meeting with his Turkish counterpart included France’s Emmanuel Macro. That then somehow morphed into a summit which also brought in the Germans, Italy’s Prime Minister Giorgia Meloni, and the leaders of Egypt and Qatar. More chairs kept coming into the room until there was the equivalent of a cabinet table of leaders and advisors sitting in a long line facing each other.

What they were talking about was how each country could help in phase two of the peace effort. Now Trump had, alongside fellow signatories of this deal – Egypt, Qatar, and Turkey – ended the war, could they maintain the peace?

As Starmer put it: “We can’t treat today as historic and let it drop tomorrow.”

But these mini summits in the margins happened by fault rather than design. This day really was designed to bear witness – and offer acknowledgement – to Trump. All of these leaders turned up pretty much in the dark as to what the day held, with his peace summit convened 48 hours earlier.

That they dropped plans to make their way to Egypt is testimony to the power Trump wields.

He was utterly omnipotent. First, there was the greeting ceremony, in which each leader filed in individually for a photo and handshake with him before all returning to the stage for the family photo.

Then, at the signing ceremony, Trump sat with his three fellow signatories as the world leaders stood behind him.

“This took 3,000 years to get to this point. Can you believe it?” Trump said as he signed that deal. “And it’s going to hold up, too. It’s going to hold up.”

Finally, in another giant hall, Trump gave a speech in which he ran through all the leaders who had turned up – praising them or fondly poking a bit of fun at them accordingly, as (most) of them stood behind him.

He teased Macron for sitting in the front row rather than joining the others on the stage, joking it wasn’t like him to be low-key. He described Meloni as a “beautiful young woman”.

“I’m not allowed to say it because usually it’s the end of your political career if you say it – she’s a beautiful young woman,” said Trump mid-speech. “You don’t mind being called beautiful, right? Because you are,” he turned to say to her – her reaction obscured from view.

Now for the ‘easy part’?

Soon after, the prime minister of Pakistan, invited to say a few remarks by Trump, renewed his call for the US president to be awarded the Nobel Peace Prize.

Having brokered the deal, Trump took the moment and made it into his summit on his terms, as fellow leaders fell into line, literally standing behind him. And in his characteristic bullishness, he told his audience in this final speech that the hard part – the ceasefire – had been done, and rebuilding Gaza was the easy part.

That isn’t really what the rest of them believe: 92% of Gazans have been displaced, the Gaza Strip is a wasteland. Organising a peacekeeping force, getting Hamas to disarm and Israel to withdraw from the strip, putting together a technocratic team and peace board to oversee the running of Gaza still needs to be done.

This was a largely celebratory day, but there are concerns whether this deal will hold up. Trump says Hamas needs to disarm and disband, and yet one of their most senior leaders told Sky News a few days ago, it won’t.

Meanwhile, there is a growing humanitarian crisis in Gaza. The UK has in short order sent in £20m of aid to try to help with sanitation.

On the British side, the prime minister said he had offered to help demilitarise the strip, saying the UK can take a role in “monitoring the ceasefire but also decommissioning the capability of Hamas and their weaponry, drawing on our experience in Northern Ireland”.

“It’s really important we keep that focus. We mustn’t have any missteps now,” he said.

Trump’s peace board is still in its infancy – Starmer told me he isn’t going to sit on it, with the make-up still being discussed, while Tony Blair’s participation is controversial.

Trump said on the way over to Egypt that he was going to canvass opinion to make sure everyone is happy with the former prime minister’s presence. It comes after Bassem Naim of Hamas told Sky News that Blair was not welcome in Gaza after his role in the invasion of Iraq.

When I asked Starmer if he thought Trump should be awarded the Nobel Peace Prize he said “there’ll be plenty of people, I’m sure, nominating him” – as he paid tribute to him for getting “leaders to this position”.

Now the task for them all is to implement what Trump has set in train. If his plan works, he would be sitting on an achievement that has eluded successive US presidents for decades.

Trump should rightly be lauded for ending the war, now he must bring the peace.

Politics

California governor signs laws establishing safeguards over AI chatbots

Published

7 hours ago

October 13, 2025

admin

California governor signs laws establishing safeguards over AI chatbots

The laws will likely impact social media companies and websites offering services to California residents, including minors, using AI tools.

Politics

UK played ‘vital role’ in Gaza peace deal, says Trump aide, after minister branded ‘delusional’

Published

9 hours ago

October 13, 2025

admin

UK played 'vital role' in Gaza peace deal, says Trump aide, after minister branded 'delusional'

Steve Witkoff, the US special envoy to the Middle East, has claimed the UK played a “vital role” in helping negotiate the Gaza peace deal, smoothing over a potential diplomatic row between London and Washington.

Witkoff took to X on Monday, ahead of meeting President Donald Trump in Israel, to praise the UK.

“I would like to acknowledge the vital role of the United Kingdom in assisting and coordinating efforts that have led us to this historic day in Israel,” Witkoff wrote.

“In particular, I want to recognise the incredible input and tireless efforts of National Security Advisor Jonathan Powell.”

His comments came 24 hours after education secretary Bridget Phillipson was branded “delusional” by Mike Huckabee, the US ambassador to Israel, for claiming that Sir Keir Starmer’s presence at a signing ceremony for today’s ceasefire deal in Egypt “demonstrates the key role that we [Britain] have played”.

The minister made her remarks on Sunday Morning With Trevor Phillips but did not say exactly what the UK’s role in the ceasefire, largely attributed to Donald Trump, is or was.

Politics latest: Phillipson announces crackdown on antisemitism at UK universities

Phillipson added: “We have played a key role behind the scenes in shaping this.

“It’s right that we do so because it’s in all of our interest, including our own national interest, that we move to a lasting peace in the region.

“These are complex matters of diplomacy that we are involved in. But we do welcome and recognise the critical role that the American government played in moving us to this point.”

Her comments prompted Mr Huckabee to repost the Sky News clip on social media, claiming: “I assure you she’s delusional.”

He added: “She can thank Donald Trump anytime just to set the record straight.”

Mr Huckabee was part of the negotiating team for the peace deal, with Mr Trump calling the former Arkansas governor “AMAZING” as he said he “worked so hard, and did so much, to bring about peace in the Middle East”.

In August, Mr Huckabee said the UK and other European nations that said they would declare a Palestinian state were “having the counterproductive effect that they probably think that they want”.

Israel: UK did not play key role in peace deal

Israel’s deputy foreign affairs minister, Sharren Haskell backed Huckabee, telling Sky News the UK played “the opposite” of a key role in the peace deal after recognising the Palestinian state.

“The message that the UK government has sent Hamas was the message that: the longer they continue this war, they will be rewarded.

“I mean, you must understand that when a terrorist organisation is thanking you. You are on the wrong side of history.”

It is understood the prime minister has underlined Mr Trump’s key role in securing this deal throughout the process. Publicly, he praised Mr Trump twice in his press conference in India on Thursday.

Ms Phillipson stood by the September decision to declare a Palestinian state, saying it was “the right thing to do”.

Husam Zomlot, the Palestinian ambassador to the UK, told Sky News it was a “moment of leadership” for the UK to declare a Palestinian state, and a “responsibility to begin to correct a century of the gravest historic injustices committed against our people”.

He added: “That moment three weeks ago, when the UK did recognise, is a moment when we can say that the wheels of history are turning in a different direction.”

No plans for British troops on the ground

The education secretary also told Sky News the government has “no plans” to put British troops into Israel or Gaza as part of a stabilisation force after the ceasefire.

The US military will help establish a multinational force in Israel, known as a civil-military coordination centre, which is likely to include troops from Egypt, Qatar, Turkey and the UAE.

On Friday, US officials said up to 200 US troops already based in the Middle East will be moved to Israel to help monitor the ceasefire in Gaza.

The day before, President Trump announced Israel and Hamas had “signed off on the first phase” of a peace plan he unveiled last week.

Aid trucks have been gathering in Egypt to cross into Gaza after months of warnings by aid groups of famine in parts of the territory.

In Israel, the remaining hostages are due to be returned from Gaza by Hamas on Monday under the first phase of the peace plan. Twenty are believed to still be alive, 26 have been declared dead, while the fate of two is unknown.

The ceasefire agreement has been made two years after Hamas stormed Israel on 7 October 2023, killing 1,200 people and taking 251 hostages.

Israel’s military offensive has killed more than 67,000 Palestinians in Gaza, according to the Hamas-run health ministry, which the UN deems reliable.