Getting a Markets in Crypto Assets (MiCA) license to operate in Europe is great, but alone it will not be enough to make money, 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 them, 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 do, even as a MiCA holder – unless you are Kraken or BItpanda or Bitvivo, who are already making money because they have multiple licenses.”
Even Bybit, the world’s second-largest cryptocurrency exchange by trading volume, is a long way 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 under the current MiCA license. But we can afford it because we are a big entity. For us, it’s a long-term investment,” Zhou said. “It may be five years away, but I think that’s a bit of a long time. I would assume we’ll probably be profitable within two years.”
Market consolidation is on the way
A MiCA license issued by one country allows a cryptoasset provider to operate across the European Economic Area (EEA): all 27 members of the European Union as well as Norway, Iceland and Liechtenstein.
Now is a critical time for many small and medium-sized crypto companies in Europe, because the MiCA grandfathering period closes at the end of June. This means that firms must have obtained MiCA permission to operate across the region by July 1 – a cutoff that is widely expected to be the death knell for many smaller crypto firms.
“There will be market consolidation,” Zhou said. “That’s why these guys shut down. Because even though they know they could afford MiCA, they say, “WTF, I need [MiFID, EMI] to make money and I have to make a whole lot of investment in compliance infrastructure to be profitable?’”
MiCA itself is changing, with some countries’ regulators calling for tighter, more centralized controls and giving increased oversight to bodies such as the European Securities and Markets Authority (ESMA). And when it comes to structured products, ESMA recently reminded crypto firms that offer perpetual futures that some of these products may fall outside the rules.
Zhou said Bybit chose a strict regulator in Austria’s FMA, a decision he said will pay dividends down the line. Each country interprets MiCA differently, he said: “Some countries interpret it as a way to attract new business; some want heavy regulation. So you actually have different levels of stringency.”
As for bringing ESMA into the mix, Bybit is neutral, Zhou said.
“There is talk of a more level playing field,” he said. “But there can be disadvantages. Because when you have a local regulator, they are easy to get to. 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 stand up. There are more CASPs, increased bureaucracy, reduced efficiency.”
