By Andrey Sergeenkov, Andrey Sergeenkov is a freelance crypto journalist
Ireland’s Central Bank is enhancing its authorization process for crypto companies as the European Union prepares to implement the Markets in Crypto-Assets Regulation, often abbreviated as MiCA. Irish Deputy Governor Derville Rowland announced this development during a speech at the Association for Financial Markets in Europe’s 8th Annual European Compliance and Legal Conference on September 23, 2024.
The authorization process, which crypto businesses must complete to operate legally in Ireland, involves regulatory approval of a company’s financial stability, risk management systems, and compliance with anti-money laundering regulations. In his conference speech, Rowland said this process will involve “better risk assessment, better communication and better supervisory outcomes have been the output of that work.”
This move comes as part of Ireland’s preparation for MiCAR, a EU-wide regulatory framework for crypto-assets. MiCAR aims to establish consistent rules across EU member states for crypto-asset issuers and service providers.
“We are working closely with our EU Peers and the ESAs to ensure the necessary coordination and consistency across Europe,” Rowland said.
Ireland’s Central Bank now aims to strike a balance between innovation and risk management. Rowland highlighted the significant potential of blockchain technologies by saying: “We can see the many areas where the blockchain has significant potential to bring about positive change, even transformation, in how we do things. Whether this be tokenization of investment products or improvements in post-trade infrastructure and interoperability, there are important positive stories to tell.”
Concerns Over Implementation And Compliance
While this move aims to simplify procedures, some industry representatives express concerns about potential challenges during implementation. “Talking about regulations in this industry is good, as governments are getting ready for mass adoption. The problem is, how will these regulations hinder development, and most importantly, deployment,” Daniel Logvin, CEO at LedgerByte, said in an email interview. “Compliance is a very tough thing to achieve, especially when lots already have systems that work,” Logvin added.
“It provides increased regulatory clarity, which will help support institutional trust, investor confidence and consumer protection,” Susana Esteban, Managing Director at FTI Consulting, said in an email interview. However, she cautions that “It adds more compliance responsibilities (and potentially costs) for crypto companies and traditional financial entities working with digital assets.”
Ireland’s Potential As A Crypto Hub
Ireland’s appeal to crypto companies has been growing for years, according to Blockworks journalist Ben Strack. The Irish government launched an ‘Innovation Hub’ in 2018, facilitating engagement between fintech firms and the Central Bank of Ireland. Coinbase opened its Dublin office in late 2018, while Gemini became the first Virtual Asset Service Provider (VASP) in Ireland in July 2022. MoonPay gained VASP status in August 2023, and Kraken received E-Money Institution authorization in September 2023.
Gracy Chen, the CEO of Bitget, said in an email: “We welcome regulatory clarity and continued improvement and enhancements by regulators to adapt regulations to both protect users and markets but also balancing out the need to continue to foster innovation and growth.”
“Certainly Ireland is always high on the list for innovative companies to be based there as a global financial center, its membership and access to the European Union as well as its favorable business environment including its deep talent pool,” she added. “This certainly helps to encourage crypto companies to consider Ireland more seriously as a base,” Chen said.
Richard Lofthouse, the Head of Risk and Data Science at InFlux Technologies, offered a more cautious perspective. “If Ireland pairs this with tax incentives or a business-friendly environment, it could become a hub for crypto firms, but this legislation is EU wide and it may have some competition for business,” Lofthouse said in an email interview.
Balancing Regulation With Innovation In EU
MiCAR regulates previously uncovered crypto-asset activities in the EU, including their issuance, custody, administration, and trading on platforms and exchanges. “This could position the EU as a leader in crypto regulation, but being a leader in rules doesn’t always translate to success in the market. It’s important for the EU to find a balance between strong regulation and allowing room for innovation to stay competitive globally,” Logvin said in an email interview.
“Regulatory certainty can be a competitive advantage. MiCA provides regulatory guidelines, which could make EU-based crypto businesses more attractive to institutional investors and partners, boosting their global credibility,” Esteban concluded in her email interview.