Obtaining a Markets for Crypto Assets (MiCA) license to operate in Europe is great, but alone it will not be enough to turn a profit, 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. To do this, 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 can’t do, even as a MiCA holder, unless you are Kraken, BItpanda or Bitvivo, which are already making money because they have multiple licenses.”
Even Bybit, the world’s second-largest cryptocurrency exchange by trading volume, is far from breaking even in Europe, Zhou said. That 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 large entity. For us, it is a long-term investment,” Zhou said. “It might be five years away, but I think that’s a little long. I guess we’ll probably be profitable within two years.”
Market consolidation is coming
A country-issued MiCA license allows a cryptoasset service provider to operate throughout the European Economic Area (EEA): the 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 businesses in Europe, because the MiCA protection period ends at the end of June. That means companies must have obtained MiCA authorization to operate across the region by July 1, a cutoff point that is expected to be the death knell for many smaller crypto companies.
“There will be market consolidation,” Zhou said. “That’s why these guys are closing. Because even if they know they can afford MiCA, they say, ‘WTF, I need [MiFID, EMI] to make money, and I need to make a huge investment in compliance infrastructure to be profitable?’”
MiCA itself is undergoing changes, with some country regulators demanding stricter, centralized control and giving greater 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 fall outside the rules.
Zhou said Bybit chose a strict regulator in Austria’s FMA, a decision he said will pay dividends in the future. Each country interprets MiCA differently, he said: “Some countries interpret it as a way to attract new business; others want strict regulation. So there are actually different levels of rigor.”
As for bringing ESMA into the mix, Bybit is neutral, Zhou said.
“There is talk of more equitable conditions,” he said. “But there could be disadvantages. Because when you have a local regulator it’s easy to get to them. If we have a problem, 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 CASPs, more bureaucracy and less efficiency.”
