FinTechON | Father of MiCA: Global digital finance knows no borders, but regulation is stuck at borders?

In today's rapidly developing landscape of Blockchain, AI, and cloud technology, the global financial ecosystem is being digitized and globalized at an unprecedented speed. However, behind this revolution lies a significant gap that is difficult to bridge — the disparity between "borderless digital finance" and "localized regulatory rules." Peter Kerstens, an advisor to the European Commission who is hailed as the father of the Markets in Crypto-Assets (MiCA) regulation, recently pointed out that while technology has advanced, regulation remains stuck in the last generation, posing a common challenge faced by countries.

Digital finance is relentless, but regulatory progress remains stagnant.

Kerstens pointed out that the digital financial system is now almost running 24 hours a day, allowing funds to flow across borders instantly and without geographical restrictions. However, regulatory policies in various countries still operate independently, making it difficult to keep pace with technological advancements. This development not only creates regulatory gaps but may also pose risks to consumers and the financial market.

He bluntly stated: "How to bridge the gap between global digital finance and local regulation is a common issue for international regulatory agencies in the future."

MiCA: The most comprehensive encryption regulatory framework in the world.

The "Markets in Crypto-Assets" (MiCA) regulation passed by the EU in 2023 is described by Kerstens as "the most comprehensive crypto regulatory framework in the world today," even being initiated earlier and covering a wider scope than the GENIUS bill currently being discussed in the United States.

MiCA sets four core objectives:

Provide legal certainty: let encryption assets no longer be in a gray area.

Protecting investors and consumers: strengthening transparency and accountability mechanisms

Maintain financial stability: Reduce potential systemic risks

Support and promote innovation: Encourage technological development under the premise of compliance.

Dual-track regulation for issuers and service providers

The regulation of MiCA on the encryption market is divided into two main parts:

Issuer Regulations

All encryption asset issuers (such as Bitcoin and Ethereum) must publicly disclose a white paper that clearly outlines technical details, supply, and holder rights. It is strictly prohibited to exaggerate investment returns or appreciation promises. Stablecoins (such as USDT) must obtain approval and comply with capital and prudential standards to ensure they can be redeemed at face value.

Service Provider Regulations

Exchanges, custodians, brokers, advisors, and asset management firms are all required to obtain licenses, meet capital requirements, and comply with operational regulations. Since most users participate in the market through service platforms, the focus of investor protection also centers on this aspect.

EU's "Single Passport": One Compliance, Access to 27 Countries

Another major highlight of MiCA is the EU's unique "single passport" system. As long as a MiCA license is obtained in one member state, access to the entire EU market is granted, directly reaching a population of 450 million.

Although the initial compliance costs are not low, in the long run, they can significantly reduce cross-border legal and administrative barriers, making it extremely attractive for businesses looking to expand into the European market.

With numerous legislative challenges, how can the EU resolve them?

Kerstens admitted that the birth of MiCA was not smooth sailing, as the EU encountered four major challenges during the process:

1. Educational Disparity and Shortage of Professionals

In the early legislative stage, most policymakers knew almost nothing about concepts such as Blockchain, wallets, and zero-knowledge proofs, and it was necessary to educate and promote from scratch.

2. The policy direction is difficult to determine.

There was once a tug-of-war within the EU: should the priority be "protecting consumers first" or "embracing innovation first"? Without a consensus, legislation can easily get bogged down in the mire of technical details.

3. Multi-party interest coordination

27 member countries, 700 representatives, each representing different interests and cultures, like a "cat herding team"; the coordination process is challenging, but compromise is necessary to create market regulations that can operate across borders.

4. The Shift in Mindset and Culture

Financial technology innovation pursues "speed," while regulatory logic emphasizes "stability." Balancing the two and avoiding a repetition of the 2008 financial crisis tragedy is a red line that must be constantly reminded during the legislative process.

The provision is just the starting point; the key to implementation lies in "attitude".

"No matter how perfect the regulatory framework is, it cannot be implemented without the right attitude." Kerstens believes that the mindset of both regulatory agencies and the industry is crucial. Whether the former is willing to support innovation and whether the latter is willing to comply honestly are key to whether regulations can truly take effect.

Taiwan's draft converges with MiCA? Cross-border trends emerge

Kerstens also observed that Taiwan's recent regulatory draft regarding encryption assets has quite a few similarities with the MiCA framework, indicating that countries often arrive at similar conclusions when faced with the same technology and risks.

He further analyzed that the global regulatory layout actually presents a pattern of "Romance of the Three Kingdoms:"

United States: Innovation Leader

Asia: Improvement and Practical Application

Europe: Focus on Regulation Development

Although the three parties have different roles, they can complement each other perfectly. Kerstens concluded, "The future of finance is digital and borderless; however, trust and regulation must still be localized. Only through cross-border coordination can we build a stable and innovative new financial world."

This article FinTechON｜Father of MiCA: Global digital finance knows no borders, but regulation is stuck at national borders? Originally published on Chain News ABMedia.