EU Agrees Comprehensive Framework For Crypto Regulation
EU Parliament approves ‘Markets in Crypto Act’ (MiCA) for regulation of crypto transparency, disclosure, authorisation, and supervision
The European Parliament has voted to approve the world’s first comprehensive framework for crypto regulation.
In a vote Thursday, the EU Parliament voted 517 in favour and 38 against to pass the Markets in Crypto Act (MiCA), which it said would enable the tracing transfers of crypto assets in the European Union.
Crypto transfer rules
As far back as 2020 the European Union had been planning new rules designed to encourage the adoption of digital financial instruments to bring crypto-assets into line with existing regulatory frameworks.
Now the European Parliament has endorsed the first EU rules to trace crypto-asset transfers, prevent money laundering, as well as common rules on supervision and customer protection.
The Parliament said MiCA is “the first piece of EU legislation for tracing transfers of crypto-assets like bitcoins and electronic money tokens.”
The text aims to ensure that crypto transfers, as is the case with any other financial operation, can always be traced and suspicious transactions blocked, it said.
The so-called “travel rule”, already used in traditional finance, will in future cover transfers of crypto assets. Information on the source of the asset and its beneficiary will have to “travel” with the transaction and be stored on both sides of the transfer.
The law would also cover transactions above €1000 from so-called self-hosted wallets (a crypto-asset wallet address of a private user) when they interact with hosted wallets managed by crypto-assets service providers, the EU Parliament noted.
The rules do not apply to person-to-person transfers conducted without a provider or among providers acting on their own behalf.
In January this year, a European Parliament committee had voted to approve draft capital rules that would introduce “prohibitive” restrictions on banks that hold crypto assets.
To reduce the high carbon footprint of crypto-currencies, significant service providers will also have to disclose their energy consumption.
“This puts the EU at the forefront of the token economy with 10 000 different crypto assets,” said Stefan Berger, lead MEP for the MiCA regulation. “Consumers will be protected against deception and fraud, and the sector that was damaged by the FTX collapse can regain trust.” “Consumers will have all the information they need and all underlying risks around crypto-assets will have to be monitored,” said Berger. “We secured that the environmental impact disclosure will be taken into account by investors in crypto assets. This regulation brings a competitive advantage for the EU. The European crypto-asset industry has regulatory clarity that does not exist in countries like the US.” “Currently illicit flows in crypto-assets are moved swiftly across the world, with a high chance of never being detected,” added Ernest Urtasun, co-rapporteur for the Economic and Monetary Affairs Committee on crypto-asset transfers. “This will close a major loophole in our AML framework and implement in the EU the most ambitious travel rule legislation in the world so far, in full compliance with international standards.”
The texts will now have to be formally endorsed by the Council, before publication in the EU Official Journal.
They will enter into force 20 days later, meaning the new EU laws could come into force by 2024.
Earlier this week Andrew Griffith, economic secretary to HM Treasury, said UK laws to regulate the cryptocurrency industry, are set to arrive in the next 12 months.
The UK government it should be remembered had in February laid out its plans to regulate crypto assets and had opened its suggestions up for consultation.
That consultation period ends 30 April.