The European Parliament and the Council of the European Union reached a provisional agreement to generate the necessary legal framework to regulate the cryptocurrency market. The parties have agreed on the points covered in the proposal Mica (Markets in Crypto Assets), which must now obtain the approval of the Committee on Economic and Monetary Affairs of the European Parliament, and will later be put to the vote in plenary session; and to this must be added the necessary approval by the Council. Thus, it is estimated that the regulations could only come into force at the end of 2023.
But the agreement signed on Thursday night is a very important step forward for the European authorities, since they have been able to find a balance between which sections of the crypto market they want to legislate on and how to do it. This is, in a way, the end of a long stage that has not been without controversy. Let’s not forget that one of the first drafts of the project included the prohibition of all crypto assets that were generated through the system Proof-of-Work, due to its high energy consumption and environmental impact. This was a move that directly targeted Bitcoin and Ethereum, although it generated such a negative reaction in the industry that it was later removed.
As explained by the European Parliament, they have defined a “uniform legal framework” for cryptocurrencies in all EU member countries. In addition, they promise to protect the public from market manipulation and financial crimes. MEP Stefan Berger celebrated the agreement reached:
“MiCA is a European success. We are the first continent to have crypto asset regulation. In the ‘Wild West’ of the cryptocurrency world, MiCA will set global standards. MiCA will ensure a harmonized market, provide legal certainty to crypto asset issuers, will ensure a level playing field for service providers and will ensure high standards for customer protection.”
For its part, Bruno LeMaireMinister of Economy and Finance of France, also expressed himself in the same vein:
“Recent developments in this rapidly evolving sector have confirmed the urgent need for regulation at the EU level. MiCA will better protect Europeans who have invested in these assets and prevent misuse of crypto assets, while promoting the innovation to keep the European Union attractive. This landmark regulation will put an end to the crypto ‘Wild West’ and confirms the EU’s role as a standard-setter for digital issues.”
What does MiCA propose to regulate cryptocurrencies in the European Union?
The agreement reached by the European Parliament and the Council of the European Union establishes that MiCA will supervise the actions of “cryptoactive service providers”. This not only involves the major cryptocurrencies, such as Bitcoin and Ethereum, but also the stablecoins and to all projects involving the development and issuance of tokens that can be traded for fiat money.
However, it is worth noting that NFTs will not be covered by the regulations, though not in all cases. The non-fungible tokens that will be exempt from MiCA will be those that are sold at a fixed price, or that are elements of a video game (skins, collectibles, clothing, etc.). In any case, the legislation could change in this section if necessary.
Another important point is the environmental impact. All companies that participate in the cryptocurrency market will have to report on the effects that their assets have on the climate. While the European Securities and Markets Authority will establish the regulatory technical standards on the subject.
The European Banking Authority, meanwhile, will create a public registry of all providers that do not comply with regulatory standards. Also, there will be stricter anti-money laundering controls for companies whose headquarters are in countries considered high risk or tax havens.
a long discussion
The regulation of cryptocurrencies is always a hot topic of debate within the ecosystem and still has many detractors globally. However, some of the companies that are part of the sector are not averse to having an overview of clear rules to operate. In particular, centralized exchange platforms and issuers of stablecoins and tokens that reflect the value of commodities like gold.
CircleFor example, the firm behind stablecoins like USDC and the recently announced Euro Coin came out in favor of MiCA. “Europe’s next crypto asset policy framework will be to crypto what GDPR was to privacy. Establishing a harmonized policy and regulatory standard for something so fundamental to the future of crypto assets in the world’s third largest economic zone is an important milestone.” Dante Shootsdirector of Strategies and head of Global Policies of the firm.
And while some may see the regulation as “onerous and anti-innovation”, he assured that it is necessary for the future of cryptocurrencies in the EU. “Ultimately, it offers a path for Europe to emerge as a competitive region for the safe and sound development of an always-on financial system,” she said.
For now, MiCA has taken an important step but still has a long way to go before it comes into force. Let us not forget that the European Union is also working to end the anonymity of cryptocurrencies, although that that other battle; and much more controversial.