The European Union's Markets in Crypto-Assets (MiCA) regulation is set for full implementation by December 2024, placing pressure on crypto exchanges and asset providers to meet stringent new standards.

Ahead of her appearance at the upcoming Benzinga Future of Digital Assets event, Sandra Ro, CEO of Global Blockchain Business Council (GBBC), discussed the challenges facing European market players as they prepare for MiCA's requirements.

Reflecting on earlier compliance deadlines, Ro noted confusion led many exchanges to delist certain assets: "As we saw in the June 30 MiCA deadline for fiat-backed stablecoin compliance, there was confusion in the market, and most crypto exchanges decided to delist certain ‘non-compliant' stablecoins."

Travel Rule Compliance and Industry Uncertainty

With MiCA's travel rule set to take effect in December 2024, Ro pointed to ongoing concerns about how it will apply to crypto asset service providers (CASPs) across Europe. The rule will require CASPs to track information on crypto transactions for transparency.

Ro cited Elsa Madrolle of VerifyVASP, who recently posted on LinkedIn that the European Banking Authority (EBA) proposed a "tolerance period of six months during which full travel rule functionality mishaps will be tolerated." However, according to Ro, the terms of this transition remain unclear, as some providers might be permitted to implement the rule gradually, while others may not receive the same leeway.

Madrolle's post further reveals a lack of consensus among regulators, particularly concerning whether CASPs will be allowed "grandfather" status or need immediate compliance by the end-of-year deadline. As Ro explained, interpretations of MiCA's provisions could vary widely, leaving questions about the enforcement scope.

Compliance and Potential Enforcement Challenges

Ro stressed that meeting MiCA's compliance standards will not be straightforward for many operators. "The practicality of implementation is often less straightforward than practitioners would like as specific details or concepts like being ‘grandfathered or not' are up for interpretation," she said.

These challenges raise questions about how enforcement might unfold, especially if crypto exchanges and CASPs are labeled "non-compliant" for failing to meet MiCA's demands on time. As Europe's digital asset market adjusts to these incoming regulations, Ro's remarks suggest that the MiCA framework could reshape the landscape for well-established and newer entrants in the industry.

For more of Madrolle's analysis on the topic, her LinkedIn post can be viewed here. Ro is expected to delve further into these issues at the Benzinga Future of Digital Assets event as the industry prepares for upcoming regulatory developments in the European market.

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As the digital asset market continues to mature, the convergence of regulatory shifts, M&A activities, and adoption trends will define the future of this dynamic field. Benzinga's Future of Digital Assets event in New York City on Nov. 19 will provide industry leaders and investors with a platform to explore these developments further, offering insights into the evolving regulatory environment and the latest market dynamics.

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