Obtaining a Markets in Crypto Assets (MiCA) license to operate in Europe is a good thing, but, on its own, it will not be enough to generate profits, according to Ben Zhou, CEO of Bybit, one of the largest cryptocurrency trading platforms.
MiCA does not cover the full range of products, such as derivatives and tokenized assets, needed to be profitable, Zhou said in an interview. For these, companies also need a MiFID II (Markets in Financial Instruments Directive) license and an Electronic Money Institution (EMI) license.
“With the current MiCA framework, you can only do fiat to crypto, crypto to crypto,” Zhou said. “There are many elements of a profitable business that you cannot achieve, even as a MiCA holder – unless you are Kraken, BItpanda or Bitvivo, who already make money from multiple licenses.”
Even Bybit, the world’s second-largest cryptocurrency exchange by trading volume, is far from breaking even in Europe, Zhou said. This timeline depends on when the company acquires the other licenses it needs.
“We don’t make money from the current MiCA license. But we can afford it because we are a big entity. For us, it is a long-term investment,” Zhou said. “It might take five years, but I think that’s a bit long. I guess we’ll probably be profitable within two years.”
Market consolidation is coming
A country-issued MiCA license allows a crypto-asset service provider to operate across the entire European Economic Area (EEA): the 27 members of the European Union, plus Norway, Iceland and Liechtenstein.
This is currently a critical time for many small and medium-sized crypto businesses in Europe, as the MiCA grandfathering period ends at the end of June. This means that companies must have obtained MiCA authorization to operate in the region by July 1 – a deadline that is expected to spell doom for many small crypto businesses.
“There is going to be market consolidation,” Zhou said. “That’s why these guys are closing their doors. Because even though they know they can afford MiCA, they’re like, ‘WTF, I need this.’ [MiFID, EMI] to make money, and I have to invest a lot in compliance infrastructure to be able to be profitable? »
MiCA itself is in flux, with some national regulators calling for tighter, more centralized control and granting increased oversight to bodies such as the European Securities and Markets Authority (ESMA). And when it comes to structured products, ESMA recently reminded crypto companies offering perpetual futures that some of these products may escape the rules.
Zhou said Bybit had chosen a strict regulator, the Austrian FMA, a move he said would pay dividends down the line. Each country interprets MiCA differently, he said: “Some countries interpret it as a way to attract new businesses; others want heavy regulation. So there are actually different levels of stringency.”
As for ESMA integration, Bybit is neutral, Zhou said.
“There are discussions about a more level playing field,” he said. “But there might be downsides. Because when you have a local regulator, it’s easy to reach them. If we have problems, we just send an email and go to the FMA in Vienna. But if everyone is in Paris, then you have to queue. There are more PSAPs, increased bureaucracy, reduced efficiency.”
