In a recent report issued by the European Parliamentary Research Service (EPRS), concerns were raised over the need for stricter oversight from non-European Union (EU) regulators to ensure greater stability and development in the global cryptocurrency market. The report comes as the Markets in Crypto-Assets Regulation (MiCA) Act progresses toward implementation by December 2024, prompting calls for a more robust regulatory framework beyond the EU’s borders.
Challenges to EU financial autonomy
The EPRS report underscores the significance of the MiCA Act and its implications on the EU’s financial system. It points out that the EU’s financial stability and autonomy remain exposed to potential risks originating from policy actions taken by non-EU countries where MiCA regulations may apply. This risk factor highlights the need for international cooperation and standardization in cryptocurrency regulation.
A central concern highlighted by the EPRS report revolves around the potential implications of regulatory fragmentation on financial stability. The report argues that divergent regulatory approaches across different jurisdictions could lead to increased volatility and uncertainty in the global cryptocurrency market. Such uncertainties could negatively impact investor confidence and overall market appeal.
Additionally, the report points out that divergent regulations could hinder the mainstream adoption of stablecoins, which have gained significant traction in recent years. The lack of uniform regulatory standards for stablecoins could deter both businesses and consumers from using them as a reliable means of exchange and store of value.
The EPRS report singles out the United States as a notable example of a fragmented regulatory landscape in the cryptocurrency space. The U.S. cryptocurrency market is subject to a complex web of state-level and federal regulations, resulting in a lack of legal clarity and regulatory certainty. This fragmentation has the potential to impede the growth and development of the market.
UK’s divergence from EU regulation
The report also highlights the United Kingdom’s Financial Services and Markets Act, which is expected to diverge significantly from EU regulations concerning crypto-assets in the coming years. This anticipated regulatory gap between the UK and the EU could create challenges for businesses operating in both markets and lead to further fragmentation in the cryptocurrency regulatory landscape.
On September 18, the Malta Financial Services Authority (MFSA) initiated a public consultation to seek input on proposed changes to its cryptocurrency regulations. The aim is to align Malta’s regulatory framework with the upcoming MiCA regulations. This move underscores the willingness of some non-EU jurisdictions to harmonize their crypto regulations with EU standards, potentially mitigating some of the concerns outlined in the EPRS report.