Author: Julie Bourgeois, Head of Legal and Compliance at 6 Monks
The digital asset market is maturing and gradually becoming an important part of the global financial system, which is no longer surprising. Regulations around the world are also evolving to ensure transparency and security for all market participants. This is particularly evident in Europe, where two different regulatory models have emerged.
On one hand, there is the EU's Markets in Crypto-Assets Regulation (MiCA), which provides a clear regulatory framework for the 27 member states. On the other hand, there is the UK, which, post-Brexit, lacks a unified regulation similar to MiCA. The UK, through its new "Transformation Plan," claims to aspire to become the "best place for innovation globally" and is working on new laws to better protect the public and support the development of the crypto industry.
For fund managers, these differences may present a challenging puzzle. Should they lean towards the legal certainty offered by MiCA, or bet on the upcoming changes in the UK?
What can MiCA bring?
MiCA is expected to come into full effect by the end of December 2024, at which point it will provide clear guidance for crypto businesses within the EU. The regulation establishes a comprehensive and, more importantly, unified framework for all member states.
Perhaps the most significant advantage of MiCA is its passporting mechanism, from which many companies have already benefited. Once the transition period ends, crypto asset service providers can offer services in any EU country after being licensed by the national competent authority under MiCA. This mechanism is ideal for businesses planning to expand across the EU, as it eliminates the need to navigate fragmented regulations and understand the laws of 27 different jurisdictions one by one.
The positive impact of MiCA is particularly evident during the business expansion phase. In the past, entering another EU country meant reapplying for licenses and enduring months of approval; now, obtaining a license in one country means legal operation across the entire EU, saving businesses tens of thousands of euros and months of work time.
Flexible Regulation in the UK
On the other side of the English Channel, the UK adopts a more flexible but somewhat decentralized regulatory approach. So far, the UK has not introduced a unified regulation similar to MiCA, but it has a bold vision of integrating crypto into the existing system.
As part of its "Transformation Plan," the UK's draft crypto regulations promise to establish laws that ensure greater transparency. For the first time, the UK will introduce formal legislation, rather than relying solely on recommendations, to regulate the crypto industry.
The core goal of the UK is to protect crypto users by clarifying risk disclosure rules and service terms. Considering that crypto could bring £57 billion (approximately $77 billion) in growth to the UK economy, these new regulations could have a significant impact on the UK's crypto environment.
Despite tightening regulations, the UK still leaves room for innovation. The UK is exploring the creation of a joint "sandbox" with the US—a regulated environment for testing new crypto products.
Choosing a Domicile for Crypto Funds
Given the aforementioned differences, fund managers face a tough choice when selecting a domicile. This is particularly true for crypto funds, as it is not only a legal issue but also a strategic decision, since they need to work closely with crypto asset service providers. What factors should be considered when making a choice?
Thanks to the unified law of MiCA, crypto asset service providers in the EU can enjoy a more stable compliance environment. The regulation establishes a single licensing system for service providers.
MiCA provides legal certainty for managers and custodians, which is particularly important for institutional adoption. Such predictability could become a significant competitive advantage for the EU, attracting more companies to choose to register in the EU, especially those targeting cross-border expansion or institutional clients.
Luxembourg is a potential location for establishing funds within the EU. It has a solid history as a top financial center, excelling in fund creation and management. Clear rules and support for innovation make it an ideal choice for launching and operating crypto investment funds under the MiCA framework.
In contrast, the UK offers a more flexible and lower-threshold environment, attracting groups such as fintech pioneers who are eager to test innovations. With the UK's willingness to experiment with the aforementioned sandbox regulation, it may become an attractive domicile.
Two Paths, Each with Advantages
The UK is committed to integrating crypto into its traditional financial system and is more open to the entry of new decentralized products into the market. Its flexibility is a significant advantage. If the UK can strike a balance between innovation and investor protection in the future, it may become a leading center for DeFi.
Meanwhile, the EU's MiCA regulation provides a unified legal environment. With strict rules, the EU is positioning itself as a safe harbor for crypto funds and a global regulatory model, demonstrating how regulation can bring clarity and enhance market attractiveness.
Ultimately, this is not a matter of one side defeating the other. The two are more likely to complement each other in shaping the future of digital assets rather than being competitors.
Author: Julie Bourgeois, Head of Legal and Compliance at 6 Monks
Related: Nvidia is pushing "Physical AI," but DePAI is the right path
This article is for general informational purposes only and does not constitute legal or investment advice. The views, thoughts, and opinions expressed in the article are those of the author and do not represent the position of Cointelegraph.
Original article: “Choosing a Domicile for Crypto Funds: EU or UK?”
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
