It aims at establishing legal certainty throughout the EU via clear classification of assets and transparent guidelines for service providers and issuers. Thanks to this new legal framework, more institutional investors and resources will enter and grow the market. Plus, due to the size and relevance of the EU internal market with its nearly million customers, the MiCA can potentially set global standards and shape regulation internationally, similar to what the General Data Protection Regulation GDPR has achieved in the data protection sector.
From a global perspective, the EU is undeniably taking a leading role with the introduction of this proposal, particularly in light of the inconsistent regulatory environment in the USA which varies largely among states and offers the potential for state and federal laws to conflict or the restrictive attitude towards cryptocurrencies of many Asian countries like China, India, or Indonesia.
The MiCA could prove to be a critical piece towards that goal and attract crypto talent, companies, and investments from around the world. From my point of view, apart from numerous minor technical and judicial criticisms on single articles and wordings, the major concerns come down to three key areas. More generally speaking, the MiCA will only prove a success if the requirements for startups are not set too high.
Patrick Byrne
These financial and administrative burdens could prove insurmountable for some of the younger market participants. There is a fine line between global locational advantage through clear regulatory rules and the outward migration of innovative companies due to too high requirements. During the ongoing feedback process, the EU Commission should be particularly attentive towards the needs of younger market participants in order to ensure the viability of the startup ecosystem that propelled this whole crypto industry in the first place.
It is hard to guess the date when the MiCA will be adopted and come into force, especially considering the upcoming legislative process in the EU Parliament and the Council of the EU, as well as the foreseen transition period of 18 months. Based on estimations from EU regulators and comparisons with other EU-regulations in the financial sector, we will probably have to wait between two to four years from now until the rules apply. The discussion on crypto-asset regulation has transformed from a nerdy, niche discussion to a priority agenda item in the highest political institutions and levels in Europe.
As one example, I recently had the honor of moderating a fireside chat on crypto regulation between German State Secretary Dr. Also, the crypto-industry is now much better organized politically in trade associations and industry representations INATBA, Bitkom, etc. This maturing political ecosystem around crypto assets is what makes me the most confident that suitable solutions for the major concerns raised here will be found and that the great potential of the comprehensive MiCA proposal will be realized. Put into crypto-terminology: I am bullish about the European crypto industry and, more generally, a growing European mainstream adoption of crypto thanks to MiCA.
Play Icon Play icon in a circular border. From Zero to MiCA in just Two Years For some, the crypto market in Europe is still nothing more than an often-talked about, but financially insignificant, nerdy niche. According to this report, crypto-assets do not fall under EU law to a large extent, while at the same time posing non-negligible consumer protection and money laundering risks. The mandate was clear: the EU must take action. And the EU has taken action, at least in part.
Under the 5th Anti-Money Laundering Directive , the EU Commission obliges its member states to take action by early at the latest. However, this results in a veritable patchwork of national initiatives. Countries such as Germany, France, Lithuania, and Malta have adopted very different rules, while other states have done nothing at all. Ostensibly, the still-young crypto sector has gotten more and more fragmented—a clear locational disadvantage for the EU. Diem formerly Libra , the global stablecoin project initiated by Facebook in June , was a real wake-up call for regulators worldwide.
The realization amongst EU regulators was clear: a fully harmonized, comprehensive, and binding legal framework was needed in order to prevent regulatory loopholes and a fragmented market.
Which rules apply to crypto-assets under MiCA? Utility Token e.
Short Selling Gets Naked
Rules for issuers: Issuers of these crypto-asset categories in the EU must, in the future, publish a white paper if no exception applies and send it in advance 20 days prior to the emission for notification to their respective national financial supervisory authority, such as the BaFin in Germany. Rules for service providers: Except for existing credit institutions and MiFID II EU Markets in Financial Instruments Directive investment firms, services based on crypto-assets—for instance, engaging in activities such as custody, brokerage, trading, or investment advice—will require prior approval from national supervisory authorities to offer crypto asset services under MiCA.
The regulation of utility tokens and the question of technology neutrality. Utility Tokens are defined in MiCA art. The scope of this definition clearly includes non-financial types of assets, for example DLT-based mobility vouchers. The commission should reconsider the scope of the regulation here, otherwise that could prevent a lot of interesting non-financial blockchain use cases in the real economy due to regulatory hurdles whitepaper, etc.
The regulation of Decentralized Finance DeFi and decentralized token issuances. The issuance of a crypto-asset in the EU requires, amongst others, the publication of a white paper and notification to a supervisory authority and the establishment of a legal entity in the EU. DeFi token projects such as Uniswap, Compound, or Maker could clearly never comply with these standards. While they might benefit from the grandfathering clause crypto-assets issued before the entry into force of MiCA will not need to comply, with the exception of ART, and EMT , future DeFi tokens will not.
And the following month, during Overstock's quarterly earnings call, he will reveal that he has personally converted millions of dollars into bitcoin.
The Overstock CEO is placing more than one big bet on an unpredictable future, but Byrne has proven himself prescient before -- about the internet and the media as well as the economy. It's only natural that Overstock would be the first big-name company to embrace bitcoin, and you can bet that Byrne is serious about pushing the digital currency into the everyday world. On one level, Overstock is your basic bargain retailer, a company that will sell you just about anything on the cheap. But under the leadership of Byrne -- who's not only a doctor of philosophy but a onetime amateur boxer -- this is also a company that's seven years into a lawsuit that accuses venerable investment banks Goldman Sachs and Merrill Lynch of a "massive, illegal stock market manipulation scheme.
At times, his battles with Wall Street have left him a lonely figure, belittled by the establishment. For years, large portions of the financial press questioned his sanity as he so vehemently -- and so colorfully -- claimed that some of the biggest names on Wall Street were complicit in a scheme to drive Overstock and other companies out of business using a loophole in the stock market. But after the financial crash of , the Securities and Exchange Commission moved to close that very hole. And in the years since, Overstock has established itself as a profitable business, even as Byrne continues his crusade against Wall Street.
But he has brought attention to them, and though he has made some wrong calculations, he's hung in there, and he has built a really good business -- something I don't think he's gotten proper credit for. Adopting bitcoin is the next step along this same road. As Overstock embraces the digital currency, Byrne predicts it will spur other big names to follow its lead, including rival Amazon, and push the world toward a future where bitcoin is a true alternative to the dollar.
But, looking further down the road, as he is wont to do, he also believes that the very public, math-driven system that underpins bitcoin can remake Wall Street, eliminating the market loopholes he has railed against for so many years. Patrick Byrne calls it his finest moment. In August , during an hour-long conference call, he told an army of investors and reporters that Wall Street was plagued by a campaign to exploit a flaw in the stock settlement system and make millions at the expense of innocent companies, including Overstock, whose share price was in free-fall.
The scheme, he said, was driven by a "Miscreants Ball" of players, including hedge funds, financial analysts, government regulators, private detectives, trial lawyers, perhaps the mafia, and even the press itself. At one point, he went so far as to say that this sweeping campaign was orchestrated by a single mastermind, someone he called the "Sith Lord. But the call brought his efforts into the mainstream, and it would define Byrne in the popular press and across the internet for years to come. Though Byrne sees the call as his finest moment -- a moment when he exposed the dark underbelly of the financial world -- much of the press painted it as poppycock.
And as he pushed back in pointed, clever, and sometimes angry ways -- insisting that the press was complicit in the schemes he was fighting, that reporters were too close to the hedge funds and banks they were covering -- the heat on him only grew. In the realm of public perception, it was quite a tumble for Byrne. After he launched Overstock in -- using the internet to reinvent the flea market business, selling discount and clearance and, yes, overstock goods on the cheap -- he was a golden boy of the dot-com revolution, an executive with a pedigree the financial media couldn't resist.
As a teenager, he would skip school to spend afternoons with Warren Buffet, his "Dutch uncle," whose Berkshire Hathaway eventually purchased his father's company. He studied Mandarin at Dartmouth and philosophy at Stanford, and after he finished his PhD, Buffet tapped him to run one of Berkshire's many companies, a midwestern outfit that made uniforms for policeman, firefighters, and the military.
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And as the first wave of dot-coms went belly up, his new company used this to its advantage, turning many of those bankrupt dot-coms into suppliers by snapping up their inventory. He was also tall and blonde and classically handsome. And he was a three-time cancer survivor. In his twenties, Byrne was diagnosed with testicular cancer, and it metastasized throughout this body. The doctor doesn't expect him to live much longer,'" remembers Brown University professor Onesimo Almeida , a close friend who first met Byrne in early-'80s China, sitting in the lobby of the Bejing Hotel.
He said: 'I think that I'm turning this around. I'm starting to feel better. It was a narrative the press lapped up time and again. But after the Sith Lord call, all the praise turned to scorn. In addition to such enormous criticism from Fortune and The Times , he received a constant stream of online vitriol from an army of other news outlets and pundits, including, most notably, a former BusinessWeek reporter named Gary Weiss, who ran a blog that seemed to exist only as a means of belittling the Overstock CEO.
Some call it a crusade. Others call it a jihad. But Byrne calls it his mitzvah -- a holy mission pursued for the good of mankind. He launched this campaign against many Wall Street practices, but mainly, he took aim at something called "naked short selling. With a short sale, traders borrow shares and then sell them, anticipating a drop in the price.
If it does drop, they can buy back the shares and turn a profit.
Patrick Byrne - CoinDesk
A naked short sale works much the same way -- except that traders don't actually borrow the shares. Basically, Byrne was complaining about a flaw in the stock settlement system, the system that controls the delivery of stock from one party to another. Three days after a trade, a seller must deliver the shares to the buyer. Shares are sold but not delivered.
Patrick Murck
Some failures-to-deliver are a natural part of a rapid-fire trading system, but massive failures in a specific stock could indicate an abusive campaign to manipulate prices. Byrne's stance was that hedge funds and banks were exploiting this hole, that regulators and legislators were turning a blind eye to it, and that reporters were ignoring the practice, too, if not actively supporting it.
Certainly, most of the press discussed naked shorting as some sort of myth created by Byrne and others. But even as his father, the onetime chairman of the Overstock board, came out against his son's campaign , Byrne kept going, as only he could. When BusinessWeek reporter Tim Mullaney sent him a list of questions -- questions Byrne characterizes as the "are-you-still-beating-your-wife?
He planted someone inside a meeting of the Society of American Business Editors and Writers , recording what was said about him -- that he needed to be stopped -- and posting that online, too. He created a new company, staffed by his own journalists and web mavens, that would do nothing but fight his crusade, battling the traditional press through a website he called Deep Capture -- a nod to Byrne's claim that regulators had been "captured" by Wall Street, that there was a revolving door between the big banks and the top positions at the SEC.
And, then, in the fall of , the market crashed. The fallout would cast Byrne's crusade in whole new light.
Years later, when I spend a few days with Byrne at Overstock headquarters and sit down for dinner at his home, a jewel of a log cabin just outside the ski resort of Park City, Utah, he's still railing against the ethics of market traders and the ineffectiveness of government regulators and even the influence of the East European mafia on Wall Street. Having steeped himself in philosophy at Stanford, focusing on economics and jurisprudence, he describes the world almost like a shaman -- someone who sees things you at first don't -- and there's a palpable restlessness about him.
He sometimes has trouble sitting down for more than a few minutes. He doesn't talk like your average CEO, offhandedly sprinkling his conversation with allusions to everything from Star Wars and the Dilbert cartoons to the Austrian-British philosopher Karl Popper , and he doesn't dress like one. One morning, he shows up in a coat with leather fringe that looks like something straight out an old Hollywood Western.