Existing Financial Market Rules Enter the Crypto Asset Market

The following article is a direct translation of Petko Karamotchev’s interview for Bloomberg TV Bulgaria’s Business Start programme.

INDUSTRIA CEO Petko Karamotchev being interviewed live on Bloomberg TV Bulgaria’s Business Start programme on August 15th, 2022

The regulator and the legislator at the European level are currently trying to create a single comprehensive framework for all EU countries. This is what Petko Karamotchev, founder of Industria.tech, said on Bloomberg TV Bulgaria's Business Start with host Hristo Nikolov. The reason for the guest appearance was that at the end of June, the EU Council Presidency and the European Parliament agreed on the regulation of the crypto asset market. For the first time, the European Union will provide a legal framework for entities that issue cryptoassets, as well as for crypto service providers. 

Up to this point, European countries were divided into three groups - one strongly in favour of cryptoassets, trying to attract other capital. The second type of country, such as Germany and, to some extent, France, have been trying different ways to treat, standardise, and regulate cryptoassets. The third group of countries, the majority of countries in the EU, had no idea what to do with cryptoassets, and for them, they did not exist, Karamotchev said. He said that this regulation will also assist and influence crypto banks to operate under a certain level of supervision.

"A register of unloyal companies will also be created, viewable at any time so that individual and institutional investors can react more quickly." 

Four European regulations are expected to be finalised in 2022, the guest stressed.  "The first one is the regulation for the cryptoasset market - MiCA. The second, a particularly important regulation, is the EU pilot regimen for tokenised securities through blockchain or distributed ledger technology, something crucial for our industry. Often ignored are the two other new regulations. One is on the transfer of funds - the so-called TFR - according to information accompanying transfers of funds with certain cryptoassets, and the last one is the regulation on the operational resilience of digital technologies, the so-called DORA. It is also vital and concerns all participants.

Requirements for issuers of cryptoassets, such as minimum capital, will make the market more stable, Petko Karamotchev argued. MiCA is the broad legal framework that seeks to comprehensively regulate according to the issuance and trading of cryptoassets and stablecoins, as well as other ancillary activities and services. The regulation will certainly assist a large number of private investors, so-called retail investors and those who create and trade stablecoins. 

"This regulatory framework was first pushed through in 2020. Back then, the underlying reason for its creation was Facebook's Project Libra. This basket of currencies was renamed Diem and subsequently sank. This project is expected to become a reality by the end of the year, after which there will be a one-year grace period, and it will come into effect from 2024." 

MiCA aligns digital assets and currencies with existing financial instruments and the rules for issuing and trading fully standard financial instruments, while also introducing some specific requirements related to the nature of these assets, Petko Karamotchev explained. This regimen mirrors existing market abuse regimens in terms of trading conditions, as well as compliance with prudent market conduct rules. There are also a lot of requirements, such as minimum capital - €350,000 and 2% of reserve assets. The other interesting thing will be that the change in capital for companies in the crypto market will be done under the "watchful eye" of the regulator, the guest added. 

On how the upcoming regulation will affect so-called crypto banks, Petko Karamotchev said that they will be further monitored by MiCA. "MiCA has a concurrent effect throughout the entire EU. What a lot of companies have been doing over the last five or six years is looking for the right destination to set up their company. Similarly to how GDPR works with all European citizens, the moment a service is targeted at the European market, no matter where it is listed, it will fall under MiCA and the other regulations. They have a direct application without the need for interpretation by local legislators." 

You can find the original article and full interview here.


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