Government considers public consultation on crypto rules

The Government may ask the public how best to police the crypto asset industry under a new EU-wide framework due to come into force next year.

Under the Markets in Crypto Assets (Mica) regulation, which was adopted by the European Parliament in April, crypto trading platforms and issuers of digital currencies firms will be required to apply for a Crypto Asset Service provider licence from a national regulator, giving them a “passport” to serve customers across the 27-member country bloc.

Although Ireland is not a significant market for crypto services and employment levels in the industry here remain low, global crypto trading platforms and services providers, including Coinbase and Gemini, have set up offshore operations in the Republic in recent years.

Apart from its low business tax environment, Ireland is considered in the industry to be an attractive entry point to the wider EU market with a deep talent pool in areas such as regulatory compliance and legal matters due to the scale of the international financial services industry here. Ireland’s competent national regulator is the Central Bank.

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A spokeswoman for the Department of Finance said the department was examining the possibility of opening a “public consultation” on Mica’s implementation, particularly around certain aspects of the regulation that had been left up to the discretion of member states.

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The department was responding to questions in relation to briefing documents seen by The Irish Times that were prepared for Taoiseach Leo Varadkar in advance of a meeting representatives from Gemini, including founders Cameron and Tyler Winklevoss, in late May.

Released to Sinn Féin MEP Chris MacManus – who helped negotiate the Mica regulation – under the Freedom of Information Act, the records show that, under the heading “speaking points (if required)”, Department of Finance officials told the Taoiseach: “Ireland supports the crypto industry but must ensure that a level playing field is in place between crypto currencies and traditional fiat currencies in terms of anti-money-laundering risk.”

The Taoiseach was also told: “Ireland will continue to make strong representations during EU discussions on the legislation, to propose that measures introduced in relation to crypto are equitable to those relating to fiat currencies.” The meeting took place on May 25th, the day Gemini officially launched in Ireland, before the conclusion of the Mica legislative process in June.

The Government’s position appears to contrast somewhat with that of Gabriel Makhlouf, governor of the Central Bank, who said in May that it “might be more accurate” to describe unbacked crypto assets as “Ponzi schemes” rather than investments. In a blog post in 2021, Mr Makhlouf also said “the currency label” attached to crypto assets “implies that the characteristics of money exist when in fact they don’t”, highlighting the price volatility of the asset class.

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When asked to clarify the department’s position, a spokesman said: “Mica provides an important regulatory framework for crypto asset issuers and service providers… This will ensure we have an EU-wide regulatory framework in place that better protects all European consumers investing in crypto assets, as is the case for other asset classes in Europe.”

The documents also show that representatives from Gemini met virtually with then-taoiseach Micheál Martin in April 2021.

Mr MacManus said the documents raised “serious questions and concerns” about Government policy. “On the one hand, we have central banks and regulators the world over warning about crypto and acting to regulate it. On the other, we see an Irish Government seemingly fall over itself to meet representatives of this industry.

“This is not and never will be a major employer or productive part of the economy. Crypto is a tool of speculation not of trade. Governments should tread very carefully before courting its adherents.”

Mr Varadkar was also told by officials in the department that Gemini, which employs about 12 people in Dublin, was facing allegations in the US, where it is currently the subject of a Securities and Exchange Commission legal action, of selling unregistered securities.

The company has denied any wrongdoing and is contesting the matter in court.