Does MiCA Clash with Ukraine’s Crypto Sector?
As Ukraine looks towards joining the EU, aligning its regulations with European standards becomes crucial. However, Alex Bornyakov, Ukraine’s Deputy Minister of Digital Transformation, contends that blindly embracing MiCA could hinder the nation’s blossoming crypto industry.
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MiCA is set to introduce a comprehensive crypto regulatory framework for all 27 EU member states. Currently, European crypto businesses wishing to operate in an EU jurisdiction must adhere to that specific nation's cryptocurrency laws. Once MiCA enters into force, crypto companies can operate across the entire EU market under the “passport” regime. However, as Ukraine is not an EU member currently, it cannot avail of this MiCA advantage. Conversely, the stringent provisions detailed in this legal document will be obligatory for entities in the Ukrainian crypto arena.
Our national “homework” is not just about “copy-pasting” European legislation, but creating a competitive jurisdiction for a new sector of the digital economy that will contribute to the postwar recovery of our country,
says Alex Bornyakov.
However, it’s worth considering the complexities such as mandatory authorization, monitoring of transactions, stringent capital requirements, and the need for official documentation. In the EU, issuers of crypto assets that resemble financial instruments, deposits, insurance products, or pension disbursements are governed by existing financial market laws. Ukraine is suggesting a similar approach. However, there hasn't been a move to adjust the national traditional financial market laws accordingly. This will leave crypto asset issuers that fit the profile of financial instruments in legal limbo, unable to secure authorization in Ukraine.
It's also worth noting the cost implications for compliance. Under MiCA, to issue or list tokens, an exhaustive Whitepaper is required. Even by the European Commission's own calculations, producing such a technical document could cost between 35,000 and 75,000 euros. The costs to meet other MiCA directives can surge to an even steeper range of 2.8 million to 16.5 million euros. Such a high barrier to entering the crypto market seems unjustified for Ukraine. While established crypto entities with robust capital might manage, emerging crypto firms could be hard-pressed with these escalating expenses. This could stifle competition and centralize the market, which is far from ideal.
Moreover, crypto exchanges will likely transfer these substantial costs onto ordinary crypto holders. This is hardly the backing users anticipate from the authorities of a country at war.
There's a potential risk looming: If Ukraine adopts European legislation, it might end up without a domestic crypto market. Logically, for local firms, relocating to a European jurisdiction and benefiting from the “passporting” perks might seem more attractive. In Ukraine, where there's a clear absence of “passporting” advantages, adhering strictly to MiCA's directives lacks economic rationale.
I firmly believe Ukraine would be wise to adopt only the most technically feasible provisions of the MiCA Regulation. In this way, we could avoid overly excessive regulation for our emerging crypto market, allowing companies to develop their business and gradually adapt to the new regulatory rules,
comments Alex Bornyakov.
Previously, GNcrypto reported on the merits of Ukraine adopting MiCA in a manner tailored to its own circumstances.
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