European authorities have agreed on a set of rules amid growing demand for tighter cryptocurrency regulation. Are the new EU rules a new standard for global cryptocurrency regulation? Here are the ingredients and their contents…
Europe’s new cryptocurrency regulation provides transparency
The Markets in Crypto Assets (MiCA) rules make provisions on regulatory, investor protection, and environmental safeguards for cryptocurrencies. The agreed basic provisions will apply to exchanges and investors. The rules cover transparency, disclosure, authorization and oversight of crypto transactions.
New MiCA rules require exchanges to notify investors of crypto-related risks, costs, and fees. Moreover, the new legal framework regulates the public offering of cryptocurrencies, promoting market integrity and financial stability.
But there is no complete clarity on issues like NFTs, DeFi and stablecoins.
What has changed in MICA regulations?
The latest rules we quoted from Kriptokoin.com come as part of EU regulatory tightening measures to prevent money laundering. The EU said that cryptocurrencies currently exceed existing thresholds. Also, the mining (PoW) ban, which was previously brought up by MICA, is no longer included in the regulation.
Regarding the regulation of cryptocurrency exchanges, companies now have to inform the EU Securities Authority (EMSA) about the risks and sustainability of coins/tokens. DeFi projects will no longer be part of MiCA regulations, just as PoW is not involved in the regulation. However, studies and research on decentralized finance will continue. EU institutions will publish a detailed report for the DeFi sector by 2023.
The rules also follow the collapse of the algorithmic stablecoin terraUSD. Accordingly, USDT, USDC, BUSD etc. all stablecoins will now be overseen by the European Banking Authority (EBA). New stablecoin startups are also now required to have a representative within the EU borders.
Regarding money laundering, new exchanges to be established within the borders of the EU will be under the control of the European Securities Authority (ESMA). MiCA wants crypto exchanges to have management organization within EU borders. Hacking or bankruptcy risks for exchanges will be entirely the responsibility of exchanges. Finally, NFTs were not involved in MiCA regulations. Stating that they are different from EU cryptocurrencies, he stated that they will prepare a separate report on NFTs.
The regulations will take effect within 18 months at the latest.
Overall, MiCA is the first attempt to create comprehensive regulation for cryptocurrencies in the EU. While some of its stricter policies have shaken up a few crypto firms, some in the industry see the move as a positive step. He also believes that Europe can lead the way in crypto regulation.
As a result, MiCA states that the above clauses will take effect in at least 18 months. The period set for the regulations on stablecoins has been 12 months.
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