Navigating new regulatory waters: MiCA and DORA in Europe!

Since the birth of Bitcoin in 2009, the crypto industry has grown exponentially, with thousands of coins and tokens now being used worldwide. Governments are finally taking it seriously, introducing regulation in a similar vein to that already in place for traditional finance. 

The European Union, in particular, is ahead of the game when it comes to crypto regulation. In June 2023, the Markets in Crypto-Assets Regulation (MiCA), a regulatory framework to govern the industry, came into force. It took full effect on 30th December 2024, and all its provisions now apply to crypto-asset service providers or issuers. 

MiCA is complemented by the Digital Operational Resilience Act (DORA), which focuses on the operational resilience of crypto service providers and other financial institutions. Its main emphasis is on risk management, and firms must ensure their information and communication technology (ICT) and third-party risk management frameworks meet the resilience standards stated in the legislation.

Why regulation?

Cryptocurrency emerged because people were unhappy with how central banks and governments controlled their money and the fees they charged to make transactions. They wanted a secure and transparent way to record transactions, so they turned to blockchain technology. It has grown into a trillion-dollar industry, hitting $3.2 trillion total market capitalisation in late 2024; the sheer size dictating the same protections to investors offered by traditional financial institutions and their regulators must be introduced to the industry. 

Consumer and investor protection  

Protecting consumers and investors from the potential risks associated with crypto is the main driver behind the EU’s push for regulation. They want to safeguard them from fraud and market manipulation (where the price or behaviour of cryptocurrencies are artificially influenced), and ensure crypto service providers give their customers accurate and transparent information.