The cryptocurrency market’s breakdown has been wiping out fortunes and stoking calls for tougher oversight globally. The European Union has now decided on ground-breaking measures for regulating the industry.
Late on Thursday, EU negotiators reached a provisional agreement on Markets in Crypto Assets, or MiCA, a comprehensive set of crypto legislation affecting all 27 member states of the EU.
Stefan Berger, the principal legislator negotiating the regulations, said, “Today, we created clear standards for a harmonized market and placed order in the Wild West of crypto assets.”
He stated in a statement that the EU’s crypto regulations “will create a harmonized market, give legal certainty for crypto-asset issuers, guarantee a level playing field for service providers, and assure high standards for consumer protection.”
The new regulation grants cryptocurrency asset issuers and service providers a “passport” to serve customers throughout the EU from a single location while adhering to capital and consumer protection rules.
The crypto legislation are anticipated to have a significant global impact, much like the EU’s pioneering data privacy policy, which de facto established a global norm, and its recent landmark law addressing harmful content on digital platforms.
The EU regulations, according to Patrick Hansen, a crypto venture adviser at venture capital fund Presight Capital, “truly represent the first comprehensive piece of crypto legislation in the world.”
Since the EU arrived first, “I think there will be a lot of jurisdictions that will look closely into how the EU has dealt with it,” said Hansen.
He predicted that authorities would adopt regulations comparable to those of the EU, albeit “they might tweak a few things,” especially in smaller nations that lack the capacity to create their own standards from start.
defending inexperienced crypto investors
Exchanges, brokers, and other crypto businesses are subject to stringent controls under the Markets in Crypto Assets legislation, which are designed to safeguard customers.
Stablecoins are a type of cryptocurrency that is typically tied to the dollar or a commodity like gold, making them less volatile than other cryptocurrencies. Companies that issue or trade these assets are subject to strict transparency regulations that require them to provide comprehensive information on the risks, costs, and charges that consumers must bear.
The regulations would assist inexperienced cryptocurrency investors in avoiding falling prey to frauds and scams that regulators have warned are common in the sector.
Jackson Mueller, head of policy and government affairs at Securrency, a blockchain infrastructure startup, said, “That’s a significant benefit in this field, especially for someone who has absolutely no notion where to go, who to seek out, or where to put my money into.”
The laws would apply to companies that offer Bitcoin-related services, but not to Bitcoin itself, the most well-known cryptocurrency in the world that has lost more than 70% of its value since its November peak.
reducing the carbon footprint of cryptocurrency
Crypto companies will have to disclose their energy use and prominently display information online about their environmental and climate impact in order to allay concerns about the carbon footprint left by Bitcoin mining, which consumes enormous amounts of electricity for “proof of work” computer processing to record and secure transactions.
NFTs, or non-fungible tokens, which have grown in popularity over the past year, were exempted by the negotiators.
The digital assets, which can represent artwork, sports memorabilia, or anything else that can be digitized, are supposed to be unique and sold at a fixed price, in contrast to cryptocurrencies, according to the EU. However, it left an opportunity for later reclassification as a financial instrument or as a crypto asset under MiCA.
The goal of the European regulations is to safeguard financial stability, which is of growing concern to regulators in light of a recent spate of crashes tied to cryptocurrencies. For instance, last month saw the collapse of the stablecoin TerraUSD, wiping out an estimated $40 billion (€38.2 billion) in investor funds with little to no responsibility.
The financial meltdowns have sparked requests for regulation, and other significant countries are still developing their plans. President Joe Biden of the United States signed an executive order in March about government regulation of cryptocurrencies, which included examining the effects on economic stability and national security.
With intentions to collaborate with the federal government on developing rules, California became the first state to formally start looking at how to broadly adapt to cryptocurrencies last month.
Additionally, the UK has revealed plans to control some cryptocurrencies.
Related
- Joe Biden Returns To In-Person L.A. Fundraisers On Friday With Two DNC Events
- EU strikes deal to impose 40% quota for women on boards of large companies by 2026
Some European nations, including Germany, already have the fundamental crypto legislation. Unifying regulations throughout the EU is one of its objectives, allowing a cryptocurrency business with a license from one member state to provide services in others.
The EU regulations, which still require final approval and are anticipated to go into force in 2024, contain safeguards against market manipulation, money laundering, financing of terrorism, and other illegal activity.
On Wednesday, the EU also reached a tentative agreement on new rules that would subject cryptocurrency payments to the same anti-money laundering regulations as transfers through conventional banking.
The new laws require that when a crypto asset is transferred, information on both the source and the beneficiary be stored on both sides of the transaction. Crypto firms would have to provide this information to law enforcement officers looking into illegal activities like money laundering or financing terrorism.
Before the crypto tracking regulations are officially approved, the EU institutions are working out the technical details.
