The world’s first comprehensive set of regulations intended to control the cryptocurrency business has been passed by lawmakers in the European Parliament.
The Markets in Crypto Act, or MiCA, was approved on Thursday by a vote of 517 in favour and 38 against in the EU Parliament. Providers may be held accountable if they misplace an investor’s crypto assets under the legislation, which aims to lower risks for customers purchasing crypto assets.
The EU Parliament stated in a statement on Thursday that the rules will put a variety of responsibilities on cryptocurrency platforms, token issuers, and dealers around transparency, disclosure, authorization, and supervision of transactions.
Additionally, sales of new tokens will be subject to regulation. Platforms will be compelled to advise users of the dangers involved with their operations.
It will be necessary for stablecoins like tether and Circle’s USDC to keep enough reserves on hand to fulfil redemption requests in the case of large-scale withdrawals. A cap of 200 million euros ($220 million) in daily transactions may also be imposed on stablecoins that grow too big.
The European Securities and Markets Authority, or ESMA, will be given the power to intervene and ban or restrict those platforms if it is found that they do not effectively protect investors, imperil market integrity, or threaten financial stability.
MiCA also addresses the environmental issues related to cryptocurrencies, requiring businesses to disclose their energy usage as well as the environmental effects of digital assets.
The law was approved on Thursday, and European Commissioner for Financial Services Mairead McGuinness praised the decision and predicted that the regulations would go into effect “from next year.”
According to Andrew Whitworth, EMEA policy director for blockchain firm Ripple, the legislative approval represented a crucial turning point for the global cryptocurrency market.
Whitworth stated in an email that consistent implementation across the EU would be essential for giving crypto firms the operational transparency they need to foster innovation in Europe and avoid inadvertent fragmentation of the Single Market.
The statement says that as part of this, it’s important to make sure that the legislation is enforced fairly in terms of how various organizations’ the digital currency offerings are handled, based on the risk profiles of their operations.
A step ahead of the United States.
With a vote of 529 to 29 in favour of passing the Transfer of Funds rule, Parliament also approved a different bill that intends to lessen the anonymity associated with transfers of cryptocurrencies like bitcoin and stablecoins.
This extends the so-called “travel rule,” which mandates financial institutions check, record, and share data on both the source and recipient in order to help fight money laundering, to cryptocurrency transactions.
A thorny topic for crypto aficionados who frequently trade digital currencies for privacy concerns, transfers between exchanges and so-called “self-hosted wallets” controlled by individuals will need to be recorded if the amount exceeds the 1,000-euro level.
The CEO of Binance, the biggest cryptocurrency exchange in the world, Changpeng Zhao, stated in a tweet that his company was prepared to make changes to its operations over the following 12 to 18 months in order to be fully compliant.
The way that Binance conducts business is under close examination by the authorities. The Commodity Futures and Trading Commission sued Binance, Zhao, and Samuel Lim, the company’s former top compliance officer, in March, claiming that they deliberately solicited users from the United States without their consent.
MiCA was praised by Zhao as a “pragmatic solution to the challenges we collectively face.”
In the wake of multiple disastrous industry failures, regulators have attempted to control the cryptocurrency market. Investors lost faith in terraUSD’s technical foundation in May, leading to a $60 billion flameout. TerraUSD was a contentious stablecoin concept.
Following the collapse of terraUSD, a number of other businesses in the sector, including Three Arrows Capital, BlockFi, and Voyager Digital, also filed for bankruptcy. The fourth-largest cryptocurrency exchange at the time, FTX, declared bankruptcy in November, becoming the most well-known crypto sector failure to date.
The measure puts the EU one step ahead of the US and UK, who have not yet introduced legal regulations for the cryptocurrency industry. A U.K. official stated on Monday that precise cryptocurrency regulations may go into effect in about a year.
After the EU legislation take effect, cryptocurrency businesses will be allowed to “passport” their services across other member states using the licenses they have in one European country. In preparation for the law’s implementation, cryptocurrency businesses have been rushing to construct new offices and secure licenses from numerous European agencies.
Coinbase and Kraken, two cryptocurrency exchanges, have received virtual asset service provider licenses in Dublin. The Irish central bank is considering granting Ripple, a blockchain company, a license.
In response to strict regulatory actions on their home soil, American cryptocurrency companies have started moving overseas for expansion. The Securities and Exchange Commission this month served Coinbase with a Wells notice, which is frequently the last action taken before the regulator formally files charges.
At a fintech conference on Thursday, Coinbase CEO Brian Armstrong told that his company is ready for a “years-long” legal battle with the SEC.
The U.S. has the potential to be an important market in crypto, he stated separately in a discussion on stage, but at the moment it is not providing regulatory certainty. He claimed that if this continued, Coinbase would look into options for increasing its international investment, including moving outside of the United States.
