Evaluating MiCA Framework via Industry Perceptions of Risks

The growing economic value of blockchain-driven financial applications brings increasing risks. In recent years, EU regulators felt the urgent need to address the financial and security risks that digital currencies might pose if left unsupervised. In 2020, the European Commission proposed a draft regulation called Markets in Crypto-Assets (MiCA). It sets out the rules for the crypto-asset issuers and service providers located in the EU or serving EU clients. To date, there is no evaluation of the risks covered by the proposed regulations besides the Commission’s own evaluation. We conducted a study to identify the risk perceptions of different stakeholder groups in the market by interviewing 20 representatives of Crypto-Asset Service Providers, Crypto-Asset Issuers, Institutional Investors, and Legal Experts. We then compared the risks deemed relevant by the stakeholder groups with the risks covered in the MiCA framework. That allowed us to identify which risks and stakeholder groups’ concerns are insufficiently covered by the current version of the MiCA framework. As a result, we show that Crypto-Asset Issuers’ risks are the least addressed in the current MiCA version. Specifically, residual risks remain with regard to smart contracts, oracles, and transactions. These risks should be considered for upcoming amendments to the regulation.