EU agrees to deal on landmark MiCA cryptocurrency regulation

Bitcoin is a volatile asset and has been known to go up or down more than 10% in a single day.

Jakub Porzycki | Nurfoto | fake images

EU officials on Thursday secured agreement on what is likely to be the first major regulatory framework for the cryptocurrency industry.

The European Commission, EU lawmakers and member states reached an agreement in Brussels after hours of negotiations. The move came a day after the three major institutions finalized measures aimed at cracking down on crypto money laundering.

The new rules come at a brutal time for digital assets, with bitcoin facing its worst quarter in over a decade.

The landmark law, known as Markets in Crypto-Assets, or MiCA, is designed to make life more difficult for numerous players in the crypto market, including exchanges and issuers of so-called stablecoins, tokens that are meant to be pegged to existing assets. like the US dollar

Under the new rules, stablecoins like tie and of the circle USDC You will be required to hold ample reserves to meet refund requests in the event of mass withdrawals. They also face a cap of €200 million in transactions per day if they get too big.

While EU member states will be the main enforcers of the rules, the European Securities and Markets Authority, or ESMA, also has powers to step in to ban or restrict crypto platforms if they are deemed not to adequately protect users. investors or threaten the integrity of the market. or financial stability.

“Today, we bring order to the Wild West of crypto assets and establish clear rules for a harmonized market that will provide legal certainty for issuers of crypto assets, ensure equal rights for service providers, and ensure high standards for consumers and investors,” Stefan Berger said. , the lawmaker who led the negotiations on behalf of the European Parliament.

MiCA will also address environmental concerns around cryptocurrencies, with companies required to disclose their energy consumption, as well as the impact of digital assets on the environment.

An earlier proposal would have scrapped crypto mining, the energy-intensive process of minting new units of bitcoin and other tokens. However, it was rejected by lawmakers in March.

The rules will not affect tokens without issuers, such as bitcoinhowever, trading platforms will need to warn consumers about the risk of losses associated with trading digital tokens.

Regulators also agreed to measures that would reduce anonymity when it comes to certain crypto transactions.

Authorities are deeply concerned about the exploitation of crypto assets for laundering ill-gotten gains and sanctions evasion, particularly after Russia’s ongoing invasion of Ukraine.

Transfers between exchanges and so-called “non-hosted wallets” owned by individuals will have to be reported if the amount exceeds the €1,000 threshold, a contentious issue for crypto enthusiasts who often trade digital currencies for privacy reasons.

Non-fungible tokens (NFTs), which represent ownership of digital properties such as art, were excluded from the proposals. The EU Commission is tasked with determining whether NFTs require their own regime within 18 months.

Unstable currencies

The rules follow terraUSD collapse, a so-called “algorithmic” stablecoin that tried to maintain a value of $1 by using a complex algorithm. The debacle resulted hundreds of billions of dollars being erased from the entire crypto market.

“The EU is not happy with stablecoins in general,” said Robert Kopitsch, secretary general of the cryptocurrency lobby group Blockchain for Europe.

Policymakers have been skeptical of these tokens, which purport to be pegged to existing assets such as the dollar, ever since Facebook an attempt to launch your own token failed in 2019. Authorities feared that private digital tokens could end up threatening sovereign currencies like the euro.

Paolo Ardoino, Tether’s chief technology officer, said the world’s largest stablecoin issuer welcomes regulatory clarity.

Furthermore, Dante Disparte, director of strategy at Circle, said the EU framework represented a “significant milestone”.

MiCA “will be to cryptocurrencies what GDPR was to privacy,” he said, referring to groundbreaking EU data protection rules that set the standard for similar laws in other parts of the world, including California and Brazil.

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