On Thursday, April 20, the EU Parliament voted (517 votes for, 38 against) to adopt the Markets in Crypto assets (MiCA) Law, the world’s first comprehensive set of rules aimed at regulating the cryptocurrency industry.
What is the document about?
The legislation aims to reduce the risks for consumers who buy cryptoassets, so that providers will be liable in the event of the loss of investors’ cryptoassets. The rules will impose a number of requirements on crypto-platforms, token issuers and traders regarding transparency, disclosure, authorization and transaction control:
- Platforms must inform consumers about the risks associated with their activities.
- Stablecoins such as Circle’s Tether and USDC must maintain sufficient reserves to meet requests during mass withdrawals. Stablecoins that get too big should implement transaction limits of up to 200 million euros per day.
- The European Securities and Markets Authority will be empowered to step in and ban/restrict crypto platforms if they are found to not adequately protect investors or threaten market integrity or financial stability.
- Companies will also be forced to disclose information about energy consumption, as well as the environmental impact of digital assets.
When will it come into effect?
European Financial Services Commissioner Mairead McGuinness welcomed the law’s passage on Thursday and said she expected the rules to apply “from next year”.
✅ I will study the European Parliament’s before how to adapt the perfect EU rules to the market: on the world championship.
The rules will start applying from next year. We have client protections and protection of financial stability and market integrity. pic.twitter.com/cdn58rb9FA
— Mairead McGuinness (@McGuinnessEU) April 20, 2023
Industry reaction
Andrew Wiworth, director of policy at blockchain firm Ripple, said the parliament’s decision was “an important milestone for the crypto industry globally.”
“There is also a need to ensure that legislation is applied proportionately to how different companies’ cryptocurrency offerings are handled, based on the risk profiles of their operations,” Whitworth said.
Changpeng Zhao, CEO of the world’s largest cryptocurrency exchange Binance, said his company is “ready to make business adjustments over the next 12 to 18 months to ensure full compliance.”
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The European Parliament voted for MiCA to be implemented.
This way one of the world’s largest global markets is implementing tailored regulations for crypto to protect users and support innovation.
The fine details will matter, but overall we think this is a pragmatic solution to…
— CZ ? Binance (@cz_binance) April 20, 2023
Binance is currently under close scrutiny by regulators. In March, the US Commodity Futures and Trade Commission sued the company and its executives, accusing the company of ignoring the country’s regulatory requirements, terrorist activities and more. (More details in our previous article).
Zhao called MiCA “a pragmatic way to solve the problems we face.”
Notification of translations and less “anonymity”
The EU Parliament also approved a separate law aimed at “reducing anonymity” during transfers of cryptocurrencies such as bitcoins and stablecoins (529 votes in favor and 29 against).
The rules will require financial firms to verify, record and transmit information about both the sender and receiver during cryptocurrency transactions to help fight money laundering.
Transfers between exchanges and so-called “own wallets” owned by individuals will need to be reported if the amount exceeds €1,000.
One step ahead of the USA
After numerous catastrophic failures in the industry, regulators have tried to rein in the cryptocurrency market. The collapse of TerraUSD in May caused a chain reaction in the industry, with other companies including Three Arrows Capital, BlockFi and Voyager Digital also going bankrupt. In November, FTX, once the fourth largest cryptocurrency exchange, filed for bankruptcy.
The approval of the law puts the EU one step ahead of the US and UK, which have yet to introduce formal regulations for the cryptospace.
Once EU laws come into force, crypto companies will be able to use their licenses in one European country to legalize services in other member states. Currently, cryptocompanies, while waiting for the law to come into force, have become more active in obtaining licenses from various European authorities and opening new offices.
Crypto exchanges Coinbase and Kraken recently received licenses to provide virtual asset services in Dublin. Blockchain firm Ripple is also awaiting a license from Ireland’s central bank.
US crypto companies have long sought to expand into other countries in response to tough US regulatory moves. Last month, the Securities and Exchange Commission sent Coinbase a notice to Wells indicating plans to file a lawsuit in the future.
The exchange’s CEO, Brian Armstrong, said he was prepared for a “year-long” legal battle with the SEC. He also added that the US has the potential to become an important cryptocurrency market, but currently lacks regulatory clarity. If this continues, he said, Coinbase will consider options to increase investment abroad, including moving from the US to other countries.
What does this mean for Ukraine?
The National Securities and Stock Market Commission called the approval of the law a “historic decision”, and also noted that it is actively working with partners to launch the virtual assets market in Ukraine, and the MiCA Regulation was adopted as the basis. Soon, the text of the project will be made public for public discussion with the crypto community and representatives of relevant government bodies.
“Ukraine will be one of the first states to implement this regulation into national legislation. Currently, the text of the draft law is almost ready, and soon we will start discussions with the main stakeholders,” commented commission member Yuriy Boyko.
Source: CNBC
