EU decides on crypto regulation - The most important facts on the new "MiCA" regulation
Last Friday night, the news broke: The EU agreed on the European regulation for crypto assets, MiCA (Markets in Crypto Assets) for short. This means that the law is now final and the many regulatory ambiguities in the crypto sector should now come to an end. Europe is thus the first continent with an agreed crypto regulation and, with this regulation, provides crypto issuers and crypto service providers with a groundbreaking regulatory framework.
The aim of the new law is to prevent the misuse of cryptocurrencies, promote innovation and protect investors. CURENTIS has summarised the most important points of the new regulation for you below:
Consumer protection: In future, crypto service providers will be obliged to meet strict requirements for the protection of consumers and their wallets, so that consumers are protected from corresponding risks. Especially for transactions outside the EU, consumers have so far had only a very limited right to protection and redress in case of abuse. The MiCA makes crypto service providers liable if they lose crypto assets from investors. This includes abuses of any kind related to transactions and services of any kind.
Environmental footprint: The new regulation obliges players in the crypto market to disclose information about their environmental and climate footprint. This covers energy consumption as well as the environmental impact of crypto stocks. Details on technical regulatory standards are still being worked out in a draft by the European Securities and Markets Authority (ESMA).
Public crypto service provider register: The European Banking Authority (EBA) is to maintain a public register in future listing non-compliant crypto service providers. In addition, the MiCA puts crypto service providers whose parent companies are located in a country on the EU list of third countries with a high risk of money laundering activities or on the EU list of non-cooperative countries for tax purposes under an obligation to carry out enhanced controls in accordance with the EU anti-money laundering directives.
Stable framework for stablecoins: In future, the MiCA obliges stablecoin issuers to prove sufficient liquid reserves to ensure the stability of the tokens. This will further protect consumers and additionally provide them with a free entitlement to exchange that can be exercised at any time. Furthermore, providers of stablecoins with European domicile will be supervised by the EBA in the future.
In addition, MiCA stipulates that providers of crypto services will need a licence in the future in order to operate in the EU. Non-exchangeable tokens, or NFTs for short, do not fall within the scope of the new MiCA regulation. A proposal for the creation of regulations for the NFT market is to be prepared by the European Commission within 18 months.
Agreement on the Travel Rule for crypto service providers
At the same time, the EU reached an agreement last week on the proposal to update the regulation of money transfers and its extension to crypto value transfers (in short "TFR-E"). The so-called Travel Rule is intended to ensure transparency in the crypto sector in the future, making it more difficult for criminals to use crypto assets for money laundering. It obliges crypto service providers to collect personal data of the sender and recipient of crypto transactions and, if necessary, to forward it to the authorities. Until now, the Travel Rule only applied to transactions of fiat money, i.e.. Banknotes, coins, scriptural money and e-money. With the extension to crypto-transactions, the traceability of these is guaranteed and transactions with suspicion of money laundering can be better recognised in the future.
The minimum transaction amount of 1,000 euros discussed so far and specified by the FATF is suspended by the EU and instead provides that regardless of how many crypto values are transferred, the data of the ordering party and recipient are collected. However, special requirements should apply to transactions between service providers and non-hosted, i.e. privately held wallets. In this case, the duty to inform should only apply for amounts of 1000 euros or more. No separate regulations are to be introduced with regard to data protection. The General Data Protection Regulation (GDPR) will continue to apply to money transfers.
The agreement on the MiCA regulation in combination with the extension of the Funds Transfer Information Regulation to the crypto sector is a milestone in terms of regulations set in the EU. Although there is also a lot of negative criticism in the crypto sector regarding the new regulations, the law offers more regulatory clarity, which has long been demanded by the crypto world. Now the draft still needs to be approved by the EU Parliament before the law can actually come into force.
