This was in particular, and in response, to the collapse of the crypto-currency exchange FTX. He mentioned the importance of the Crypto Asset Market Act (MiCA) as a path that should be followed by another law: MiCA2 which also governs decentralized finance as a whole.
A similar thought was expressed today by a number of senior officials in the European Commission and the European Parliament.
MiCA would have stopped FTX
Future EU rules known as the Crypto-Asset Markets Regulation (MiCA) would have put an end to FTX-style mismanagement, senior officials said today, despite lawmakers’ skepticism about the effectiveness of the new rules. It should be noted that the European Parliament will vote on this law in February 2023, so it is not yet in effect.
“Under the MiCA regime, no cryptoasset provider in the EU would have been allowed to organize, or perhaps I should say disorganize, in the way that FTX would have“, Alexandra Jour-Schroeder, deputy director general of the European Commission’s financial services branch, told lawmakers at a specially convened hearing today.
FTX’s failures, such as inadequate record-keeping and misuse of customer assets, were “very serious” and “potentially even fraudulent“, Alexandra Jour-Schroeder told lawmakers at the European Parliament’s Economic and Monetary Affairs Committee in Brussels, but added that she “does not see them as failures of Blockchain technology or even crypto-currencies per se.“
“With MiCA, we will be taking a step forward from the status quo” she said. The legislation, which was agreed to in principle due to a final vote by lawmakers in February, is “urgent“, but she said she did not expect a renegotiation to shorten the current 12- to 18-month period for industry to prepare for implementation.
Some legislators see FTX as a symptom of larger problems. “In the world of crypto-currencies, there are constant problems“, said Aurore Lalucq, a left-leaning French lawmaker. “Every day there is market manipulation and people embezzling funds“.
“I wish the commission would wake up a little“, added Aurore Lalucq. “Can we really hold our heads high and say that Binance, for example, which is registered in Europe… could not go bankrupt?“.
For his part, Ernest Urtasun, a member of the European Parliament’s Green group, said he had “serious doubts that MiCA would have avoided” the scandal. Ernest Urtasun called for short-term measures to address the risks or block risky crypto products in the short term. “We must have the means to act very quickly“, he added.
European Securities and Markets Authority (ESMA) officials seemed to agree that FTX is not an isolated case of bad practice among crypto-currency companies, but stressed that the new European laws are a start.
“I wouldn’t comment on individual cases, but in general, the crypto industry has many signs of weakness in all key functions“said Steffen Kern, head of ESMA’s risk analysis and economics department, citing mismanagement and failures to segregate client funds. “MiCA, had it been in place, would have been extremely helpful“.
In defense of MiCA
Similarly, Stefan Berger, the center-right legislator who was one of the architects of MiCA, defended his plans and said that the blame should be placed on the company’s high-profile chief executive.
“FTX was the Lehman Brothers of this community“, said Stefan Berger, but he added that the fault lay “with the behavior and arrogance of an individual, Sam Bankman-Fried”, rather than with the Blockchain technology.
“MiCA to be approved as soon as possible“, said Stefan Berger, and “come into force so that in Europe we have rules that exclude this type of situation from the start“.