Proponents of the European Union’s forthcoming Markets in Crypto Assets (MiCA) regulation say it will have an effect beyond its limited scope – and the race to seize the bloc’s crypto crown has begun even before a final vote on the law.

After several years of consultation and lawmaker haggling, a final text of MiCA is set to be voted on by the European Parliament later this month. The law would likely then enter into force in July, with major provisions kicking in between 12 and 18 months later.

On paper, MiCA sets out to regulate those issuing crypto assets, ensuring white papers of investor information are honest. Providers of linked services – like crypto custodians, advisors or exchanges – will have to apply to one of 27 national authorities to get a license to operate across the whole bloc.

Beyond its limited scope, the hope is that it will also offer a wider halo of credibility to a sector that is sorely in need of it after a year of market turmoil. Both industry and government are certainly talking up MiCA’s significance.

“A crypto asset service provider, a CASP, will be a brand in the European Union… a kind of stamp of approval of the sector,” Rok Žvelc, a European Commission staffer who formed part of MiCA’s drafting team, told a Brussels event on March 30. “Investors will know that if they turn to CASPS, they will have all the protections that MiCA provides.”

Stablecoins

Companies squarely affected, such as stablecoin operators, are also upbeat.

“MiCA is an incredibly positive stop and a global regulatory landscape for crypto assets,” said Teana Baker-Taylor, vice president for policy and regulatory strategy of Circle, which hopes to use the new regulation as a springboard for its euro coin (EUROC), denominated in EU currency.

EU policymakers – alarmed first by Facebook’s Libra initiative, then by the dramatic collapse of terraUSD – said cryptocurrencies tied to other assets such as fiat should hold sufficient reserves, with trading volumes capped if they’re tied to foreign currency.

In spite of those restrictions, the new law is welcome, Baker-Taylor said.

“Just having clarity around what the rules of the road are ... is incredibly beneficial for the industry and for those market participants,” Baker-Taylor told CoinDesk. “Equally, I think it's incredibly beneficial for Europe's competitiveness.”

Much recent debate has focused on what MiCA doesn’t cover – crypto lending and staking, decentralized finance, and non-fungible tokens, all of which will be dealt with by further regulations if at all. It doesn’t go far enough to deal with major players like Binance, the European Central Bank’s Elizabeth McCaul warned in a recent blog.

Yet it still represents a significant step: as the first time a major jurisdiction, comprising some 450 million people, implements a stable framework targeting the sector. Its benefits could be felt widely.

SettleMint – a Belgian company that offers blockchain platforms as a service to other businesses – isn’t directly affected by MiCA’s precepts. But the law could embolden potential customers, such as banks, to try out innovations like tokenized bonds, its Chief Executive Officer Matthew Van Niekerk told CoinDesk.

“What holds them back is regulatory uncertainty,” both in the areas MiCA covers, and related issues such as personal data protection, he said, adding that Europe is “100% going in the right direction” towards offering that greater clarity.

MiCA could also be the hook for countries that want to impose extra measures – such as France, whose recent proposed restrictions on social media influencers would prohibit publicity for any crypto company that doesn’t hold a license.

A strange race

With so much at stake, EU member countries are in a race to see which of them can become the crypto hub of choice. In principle, MiCA sets a consistent level of rules to be followed across the bloc; in practice, national authorities may end up differing in how they implement and enforce.

It’s a race not everyone’s trying to win. Dutch regulators have already said they aren’t prepared to cut corners in an effort to win business. There may also be more than one winner as different countries play to their strengths: the likes of Belgium could end up majoring on business-to-business blockchain services rather than, say, crypto for the retail market, Van Niekerk said.

But for the time being there does seem to be a clear leader – France, recently selected by Circle as its European home, and whose existing regime known as PSAN has already registered some 66 crypto companies, including Binance, eToro and Societe Generale.

Though not the only EU country to anticipate MiCA – Malta, Estonia and Germany are among those with national regimes – France struck the right balance between attracting investment, protecting consumers and stabilizing markets, Baker-Taylor reckons. The similarities of PSAN and MiCA mean there’ll be a less bumpy landing for companies and regulators as they move from one regime to the other.

In other parts of Europe, the industry is wondering if they shouldn’t be following suit – like in Portugal, a country that attracted a significant crypto crowd in part thanks to a sympathetic tax regime, but which could now start to lose out.

“We have urged the authorities to anticipate the impacts of MiCA,” Hugo Volz Oliveira, secretary and founding member at industry group Instituto New Economy, told CoinDesk.

Oliveira’s concern is with the regulators who in principle need to bump their heads together and decide on administrative procedures for companies to convert existing registrations into a MiCA license.

Spokespeople for both the Portuguese securities commission and central bank told CoinDesk they were preparing for MiCA, but that further details would only follow once rules are formalized.

Yet the longer crypto companies are left in the dark, the more they – and the wider economy – will suffer, Oliveira worries.

“Portugal will be very likely to lose the race” to become a crypto hub, he said, meaning fewer applications for regulators to process. “That’s good for bureaucrats, but bad for the country.”

Read more: MiCA at the Door: How European Crypto Firms Are Getting Ready for Sweeping Legislation