Markets in Crypto-Assets Regulation (MiCA) was approved by the European Council. The European Union became one of the first jurisdictions in the world to introduce comprehensive rules on crypto-assets, consumer protection, financial stability, and innovation.
At a plenary session of the European Parliament on April 20, EU MEPs gave final approval to new legislation on supervision, consumer protection, and environmental safeguards for crypto-assets — Markets in Crypto-Assets Regulation (MiCA).
MiCA will cover crypto-assets that aren’t subject to current financial services legislation and will address the issuance and trading of these assets. The bill will ensure transparency, disclosure, authorization, and oversight of transactions. The new rules also provide for better consumer awareness of risks, costs, and fees and support market integrity and financial stability.
MiCA also contains measures to prevent market manipulation, money laundering, and terrorist financing. The European Securities and Markets Authority (ESMA) will create a public registry of crypto-asset service providers that operate within the EU.
Moreover, as part of the bill, large crypto service providers will have to disclose their energy consumption in order to reduce the negative environmental impact.
MEPs also approved the EU’s first piece of legislation to track crypto-asset transfers. It envisages the ability to track cryptocurrency transfers, as is the case with other financial transactions, and to block suspicious transactions. In the future, crypto-asset transfers will be subject to the so-called “travel rule” already used in traditional finance. Details about the source of the asset and its beneficiary would be transferred along with the transaction and kept by both parties of the transaction.
The law will apply to transactions over €1,000 from private wallets interacting with wallets managed by crypto-asset providers. The rules don’t apply to transfers between people without providers or between providers acting on their own behalf.
Representatives of private payment systems believe that the MiCA bill will significantly limit business opportunities in the EU.
According to the Chainalysis report, MiCA’s regulations regarding stablecoins will take effect in July 2024, while other provisions, including requirements for crypto-asset service providers, will apply starting in January 2025.
Leading members of the cryptocurrency community and politicians reacted positively to the bill’s passage, praising its prospects. For example, Changpeng Zhao, CEO of Binance, said the exchange would begin implementing changes in the next 12-18 months to comply with the new legislation. Zhao believes MiCA is a “pragmatic solution to the challenges” faced by all crypto market participants.
Some members of the crypto community suggested that the adoption of MiCA could create a bad environment for crypto firms and investments in the U.S. American regulators chose an “enforcement strategy” in overseeing the crypto market, which led to a large number of accusations of overstepping their authority. Therefore, regulation in the U.S. remains uncertain, forcing cryptocurrency executives to consider relocating to other jurisdictions.
However, the current draft bill also has several problems that make the cryptocurrency community cautious about MiCA. In particular, the bill makes no mention of decentralized finance (DeFi), the burgeoning crypto lending and staking sector, and omits any rules for non-fungible tokens (NFTs).
Recently, the CoinsPaid team organized a conference to discuss the future of European cryptocurrency regulation, bringing together prominent European crypto business representatives, politicians, and other stakeholders.
