The requirements of the new MiCA regulation—including new rules and obligations for monitoring, detecting and preventing market abuse-are wide-ranging.
Recent research has laid bare the challenges facing firms as they work to establish MiCA-compliant surveillance systems. As of mid-2024, 25% of firms that expected to be covered by MiCA had not yet begun preparation. Only 9% reported they were fully ready.
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Navigating MiCA challenges
The path to compliance—and the hurdles along the way—vary depending on the type of market participant. For traditional firms, MiCA marks an extension of existing trade surveillance requirements under MiFID II and MAR regulations with a provision for fast-track authorisation for firms already regulated under such directives. However, some operational refinement and optimisation is needed to ensure compliance.
In contrast, native crypto firms have a much bigger job on their hands. Despite undoubted recent advances in their trade surveillance and monitoring capabilities, the imposition of regulation from a major financial jurisdiction raises the stakes significantly and creates stringent new requirements that must be adhered to.
This demands wholesale changes to day-to-day operations, including adjustments and upgrades to existing surveillance systems, or the implementation of entirely new ones.
Given the inherent complexity of complying with any financial legislation, a lack of institutional expertise is also proving to be a major roadblock (particularly for crypto firms, as this is one of their first experiences with prudential and direct regulation). Nearly three-quarters of firms working to establish MiCA-compliant surveillance systems have reported difficulties in securing skilled, experienced surveillance staff. This is amplified by the differing characteristics and requirements of traditional finance and crypto market structures, with an industry survey indicating that over 70% of firms have cited these nuances as a significant obstacle.
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By GlobalDataAs a result of these challenges, firms are accelerating investment in trade surveillance technologies and increasingly turning to third-party vendors to support compliance efforts. While navigating the immediate complexities of MiCA is understandably top of mind, firms must also consider how partners can help address the regulation’s broader implications and the long-term impact they stand to have on surveillance operations.
Getting ahead of the regulatory curve
The crypto industry has long been synonymous with a lack of clear regulatory mandates, but there has been a concerted push from the regulators over recent years to bolster both consumer and institutional confidence. MiCA marks the most ambitious and comprehensive regulatory initiative to date, and there can be no doubt that other jurisdictions across the world will seek to pen similar approaches.
While the potential opportunity to reform the current regulatory patchwork into a more cohesive global framework should be welcomed, the compliance burden for firms stands to increase significantly. Put simply, MiCA is not a case of ‘one and done,’ and firms operating in multiple regulatory jurisdictions must be prepared to quickly adapt to new requirements as they are imposed. However, those facing compliance challenges now due to the limitations and inflexibility of legacy solutions will inevitably do so again if they do not change course and seize the opportunity to take control of their compliance today.
To understand how firms can best empower their compliance teams to meet rapidly evolving requirements, we can turn to those who are well prepared to meet their MiCA obligations for a best-practice blueprint.
This process starts with a frank assessment of whether their existing (or prospective) trade surveillance capabilities are sufficiently scalable, flexible and efficient, having been battle-tested in the most complex and high-volume environments.
Crucially, tech implementations must also be adaptable to ensure evolving compliance requirements are aligned with individual firms’ unique risk and operational profiles. This is where the ongoing support of practitioners and regulatory experts with extensive, real-world experience spanning both traditional and digital asset markets is invaluable.
By taking these steps, firms can ensure they are positioned to effectively address evolving regulatory requirements and safeguard customers—both now and in the future.
Travis Schwab is CEO of leading global provider of trade surveillance software, Eventus
