European Union (EU) officials have agreed on a landmark law that will make life tougher for cryptocurrency issuers and service providers under a single new regulatory framework.
Stefan Berger, Member of the European Parliament and rapporteur for the MiCA regulation – the person appointed to report on the proceedings related to the bill – broke the news on Twitter saying that a “balanced” agreement had been reached, which has made the EU the first continent with regulation of crypto assets.
MiCA Trilog: Durchbruch! Europa ist der erste Kontinent mit einer Krypto-Asset Regulierung. Parliament, Kommission & Rat haben sich auf ausgewogene #Mica geeingt. Für mich als Berichterstatter war wichtig, dass es hier keine Verbannung von Technologien wie #PoW gibt /1
— Stefan Berger (@DrStefanBerger) June 30, 2022
MiCA Trilog: Durchbruch! Europe is the first continent with regulation of crypto assets. The Parliament, the Commission and the Council have reached an agreement on the balance of MiCA. It was important to me as a journalist that there was no technology transfer like PoW. /1
Known as the Markets in Crypto Assets (MiCA) framework, the interim agreement includes rules that will cover issuers of unbacked crypto assets, stablecoins, trading platforms and wallets in which crypto assets are held.according to the European Council.
Bruno LeMaire, French Minister of Economy, Finance and Industrial and Digital Sovereignty, he stated that the landmark regulation will “put an end to the wild west of cryptocurrencies.”
Following the dramatic collapse of TerraUSD, The MiCA regulation aims to protect consumers by “requesting” stablecoin issuers to constitute a sufficiently liquid reserve.
In a Twitter thread, Ernest Urtasun, a member of the European Parliament, explained that the reserves will have to be “legally and operationally segregated and isolated” and must also be “fully protected in the event of insolvency.”
A cap will be set for stablecoins of €200 million in transactions per day.
3/13 Large stablecoins will be subject to strict operational and prudential rules, with restrictions if they are used widely as a means of payment, and a cap of €200million in transactions/day.
— Ernest Urtasun (@ernesturtasun) June 30, 2022
3/13 Large stablecoins will be subject to strict operational and prudential regulations, with restrictions on whether they are widely used as a means of payment, and a cap of 200 million euros in transactions per day.
Cryptocurrency users on Twitter have already dismissed the regulations as unfeasible; Tether (USDT) 24-hour daily volumes are $50.4 billion (€48.13 billion) and USD Coin (USDC) $5.66 billion (€5.4 billion) at the time of writing this article.
There would also be difficulties in applying these rules to decentralized stablecoins, such as DAI.
The deal came on the same day that Circle launched its euro-backed stablecoin: Euro Coin.
— Dante Disparte (@ddisparte) June 30, 2022
As @circlepay launches EUROC, a digital currency backed by the euro, we aim to make it a trusted, well-regulated, MICA-compliant innovation.
Crypto asset service providers (CASPs) will have to meet strict requirements to protect consumers, and may also be held liable if they lose investors’ crypto assets.
Urtasun explained that trading platforms will have to provide a technical report for any token that does not have a clear issuer, such as bitcoin, and will be liable for any misleading information.
Also there will be warnings for consumers about the risks of loss associated with crypto assets and rules on fair commercial communications.
Market manipulation and the use of privileged information are also subject to attention, According to a European Council statement:
“MiCA will also cover any type of market abuse related to any type of transaction or service, especially market manipulation and insider trading.”
The new sheriff: ESMA
The interim agreement will also make crypto asset service providers (CASPs) need authorization to operate in the EU, with the largest CASPs to be supervised by the European Securities and Markets Authority (ESMA).
ESMA is an independent regulator of the EU securities markets, founded in 2011.
The new law does not include a ban on proof-of-work technologies nor does it include non-fungible tokens (NFTs) in its scope.
Nevertheless, When it comes to NFTs, the European Commission said it will study this over the next 18 months and could create a “proportionate and horizontal legislative proposal” to address emerging market risks if it deems it necessary.
“Europe’s next crypto asset policy framework will be to crypto what the GDPR was to privacy,” added Disparte from Circle.
The interim agreement is still subject to approval by the Council and the European Parliament before it is formally adopted.
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