EU lawmakers have approved crypto legislation. Here’s how it plans to regulate digital assets
- Last week, the European Parliament’s Economic and Monetary Affairs Committee voted in favor of a new draft Framework for Crypto Asset Markets (MiCA).
- It promises to make it easier for crypto businesses to expand across the 27 EU member states by facilitating a “passportable” license that would be valid between countries.
- The MiCA project will now move on to further negotiations with EU governing bodies.
At the end of 2020, the European Union (EU) introduced a comprehensive set of regulations covering digital asset trading in the 27-nation bloc. Known as Crypto-Asset Markets (MiCAs), the proposed legislation acts as digital oversight and regulation, blockchain-based assets. Despite its long delay, last week the EU’s historic regulatory framework crossed a new threshold on the road to ratification.
Committee on Economic and Monetary Affairs of the European Parliament voted 31-4 in favor of the new MiCA framework project last Monday, aimed at building user confidence and supporting the development of digital services and alternative payment instruments. The MiCA encompasses cryptocurrencies like bitcoin and more broadly, with stablecoins.
The proposed framework would not apply to digital currencies issued by central banks (CBDC) or crypto assets such as security tokens that could qualify as financial instruments such as securities, deposits, treasury bills or derivatives. At this stage, the MiCA broadly covers the issuance and trading of cryptocurrencies and promises to facilitate the expansion of crypto businesses in the 27 EU member states by facilitating a “passportable” license that would be valid between country.
Once adopted and in force, the MiCA will be a directly applicable law in all EU member states and will regulate all issuers and service providers dealing with crypto-assets. Within the framework of the MiCA, MEPs want European Securities and Markets Authority (ESMA) to oversee the issuance of asset-referenced tokens, while European Banking Authority (ABE) will be responsible for supervising electronic money tokens.
Winds of Change in the EU Crypto Industry
Simply put, in the EU, the combination of a lack of enforceable legislation, growing regulatory fragmentation within the bloc, and a maturing crypto sector has forced the Commission to act. Due to the size and relevance of the EU internal market with its nearly 450 million customers, the MiCA, as experts say, has the potential to set global standards and shape regulation internationally, like what the General Data Protection Regulation (GDPR) has achieved in the data protection sector.
That said, under the MiCA, the main provisions agreed by MPs for those who issue and trade crypto-assets cover transparency, disclosure, authorization and supervision of transactions. “Consumers would be better informed about risks, costs and charges. Furthermore, the legal framework supports market integrity and financial stability by regulating public offerings of crypto-assets,” a official statement on Monday’s voting broadcasts.
The EU has also agreed on measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. Senior MEP Stefan Berger believes that “by adopting the MiCA report, the European Parliament has paved the way for innovation-friendly crypto regulation that can set standards around the world.”
Berger pointed out that the regulations being created are pioneering in terms of innovation, consumer protection, legal certainty and the establishment of reliable oversight structures in the field of crypto-assets. Many countries around the world will now take a close look at MiCA. »
The EU also wants to tackle environmental threats
Interestingly, the bloc even considered the environmental threats that come with crypto adoption. Previously, the committee voted to remove a provision aimed at limiting the use of cryptocurrencies that rely on the energy-intensive consensus mechanism known as proof-of-work. The rule could have, in effect, banned the popular cryptocurrency bitcoin (BTC) across the EU.
Instead, the committee voted in favor of an alternative provision that would oblige the European Commission, the body responsible for proposing new legislation, to present a “legislative proposal to be included in the EU taxonomy (a classification system) for sustainable activities all crypto-asset mining activities that contribute substantially to climate change, by January 1, 2025.”
MEPs even pointed out that other industries like the video game and entertainment industry as well as data centers also consume energy resources that are not climate friendly. They ask the Commission to work on legislation dealing with these issues in different sectors.
Subsequently, the MiCA project will move on to further negotiations with EU governing bodies. Given that the nature of the EU is different – 27 different Member States with different legal and tax systems that are not harmonized – a unique approach to policy-making is needed.