The European Union (EU) has made history by passing the world’s first comprehensive legal framework for crypto-assets, the Markets in Crypto Act (MiCA). The law received overwhelming support, with 517 votes in favor, 38 against, and 18 abstentions. The legislation will regulate crypto-assets that fall outside of existing financial services legislation, such as asset-reference tokens and e-money tokens.
MiCA will require transparency, disclosure, authorization, and supervision of transactions, promoting market integrity and financial stability. The new legal framework will also mandate disclosure of energy consumption to reduce the high carbon footprint of cryptocurrencies. The European Securities and Markets Authority (ESMA) will set up a public register for non-compliant crypto asset service providers operating in the EU without authorization.
On Thursday, the European Parliament passed the first-ever EU legislation for tracing crypto-asset transfers, including bitcoins and electronic money tokens. The “travel rule,” already used in traditional finance, will apply to transfers of crypto assets, requiring information on the source of the asset and its beneficiary to “travel” with the transaction and be stored on both sides of the transfer. The rule will apply to transactions above €1,000 from self-hosted wallets, while transactions conducted without a provider or among providers acting on their own behalf are excluded.
Lead MEP for the MiCA regulation, Stefan Berger, stated that the law will protect consumers from deception and fraud and restore trust to a sector damaged by the FTX collapse. The regulation will provide consumers with all the necessary information, and all underlying risks around crypto assets will have to be monitored. The regulation provides a competitive advantage for the EU, which will have regulatory clarity that does not exist in countries like the US. Ernest Urtasun, co-rapporteur for the Economic and Monetary Affairs Committee on crypto-asset transfers, added that the regulation would require crypto-asset service providers to detect and stop criminal crypto flows, preventing illicit flows in crypto-assets from being moved swiftly across the world.
MiCA is expected to ensure that crypto transfers can always be traced and suspicious transactions can be blocked. If a crypto disaster, like the FTX, crumble or Terra Luna bankruptcy, occurs again, consumers will be better informed and protected before committing their money to the digital asset.
Co-rapporteur for the Civil Liberties, Justice and Home Affairs Committee Assita Kanko stated that the Parliament and Council had found a fair compromise that would make it safer for people of goodwill to hold and trade crypto-assets. The new legislation will make it more difficult for criminals, terrorists, and sanctions evaders to misuse crypto-assets. The administrative burden on crypto companies and innovators will be offset by the unification of the currently fragmented European market, which has 27 regulatory regimes.
In conclusion, the new legislation is a significant step in regulating crypto-assets and providing a comprehensive framework for their supervision. The EU has taken a proactive approach to mitigate the risks associated with crypto-assets and create a level playing field for investors. The uniform EU market rules for crypto-assets will protect consumers from fraud, ensure market integrity, and support financial stability. The new legal framework will regulate public offers of crypto-assets and reduce the high carbon footprint of cryptocurrencies.
Source: Europe Parliament | europarl.europa.eu