Ben Zhou, CEO of Bybit, one of the largest crypto trading platforms, says that while winning the Markets in Crypto Assets (MiCA) license to operate in Europe is great, it is not enough to turn a profit.
Chou said in an interview that MiCA does not cover the full range of products needed to make a profit, such as derivatives and tokenized assets. In these cases, companies will also need a MiFID II (Markets in Financial Instruments Directive) license and an Electronic Money Institution (EMI) license.
“The current MiCA framework can only do fiat-to-cryptocurrency and crypto-to-cryptocurrency,” Zhou said. “There are many elements of a profitable business that you cannot do even if you are a MiCA holder, unless you are a Kraken, BItpanda or Bitvovo who are already profitable because they have multiple licenses.”
Even Bybit, the world’s second-largest cryptocurrency exchange by trading volume, is far from breaking even in Europe, according to Chou. That timeline will depend on when the company obtains other required licenses.
“With the current MiCA license, we are not making any profit. But we are a large entity, so we can afford it. For us, it is a long-term investment,” Zhou said. “It might take five years, but I think that’s a little long. I think we could probably see the benefits within two years.”
Market consolidation is coming
A MiCA license issued by a single country allows crypto-asset service providers to operate across the European Economic Area (EEA), i.e. all 27 member states of the European Union, as well as Norway, Iceland and Liechtenstein.
As the MiCA phase-out period ends at the end of June, this is an important crossroads for many small and medium-sized crypto companies in Europe. This means companies will need to obtain MiCA authorization to operate across the region by July 1, a cut-off point that is widely expected to be a death sentence for many small crypto companies.
“There will be market consolidation,” Zhou said. “That’s why they’re closing down, because even though they know they can afford MiCA, they’re like, ‘Oh my god, do I need[MiFID and EMI]to make money, and do I need to invest heavily in compliance infrastructure to make a profit?'”
MiCA itself is undergoing change, with regulators in some countries calling for tighter, more centralized controls and allowing increased oversight of institutions such as the European Securities and Markets Authority (ESMA). And when it comes to structured products, ESMA recently warned crypto companies offering perpetual futures that some of these products may fall outside the rules.
Mr. Zhou said Bybit chose the strict regulatory authority of the Austrian FMA, a decision that will pay dividends in the future. He said different countries interpret MiCA differently: “Some countries interpret MiCA as a way to attract new business, while others seek stricter regulations. So there are actually different levels of stringency.”
Zhou said Bybit is neutral regarding the implementation of ESMA.
“There are conversations going on about a more level playing field,” he said. “But there may be disadvantages, too, because if you have a local regulator, it’s easier to contact them. If you have a problem, you just send an email and go to the FMA in Vienna. But if everyone is in Paris, you have to line up. There are more CASPs, more bureaucracy, less efficiency.”
