In the night of last Friday it became known: The EU agreed on the European regulation for crypto assets, MiCA for short (English: "Markets in Crypto Assets"). This means that the law is now final and the previously 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 gives crypto issuers and crypto service providers a groundbreaking regulatory framework with this regulation.
The aim of the new law is to prevent the misuse of cryptocurrencies, promote innovation and protect investors. CURENTIS has summarized the most important points of the new regulation for you below:
Consumer protection: In the 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 previously had only a very limited right to protection and redress in the event of misuse. MiCA holds 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 requires crypto market players to disclose information about their environmental and climate footprint. This extends to energy consumption as well as the environmental impact of cryptocurrencies. 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 Registry: The European Banking Authority (EBA) is to maintain a public registry listing non-compliant crypto service providers in the future. In addition, MiCA takes crypto service providers whose parent companies are located in a country included in the EU list of third countries with a high risk of money laundering activities or in the EU list of non-cooperative countries for tax purposes to implement enhanced controls in accordance with EU anti-money laundering directives.
Stable framework for stablecoins: MiCA obliges stablecoin issuers to prove sufficient liquid reserves in the future to ensure the stability of the tokens. This will further protect consumers and additionally provide them with a free right to exchange that can be exercised at any time. Furthermore, European-based stablecoin providers will be supervised by the EBA in the future.
In addition, MiCA specifies that crypto service providers will need to be licensed 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 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 extend it 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 as well as the recipient of crypto transactions and to forward it to the authorities if necessary. Previously, the Travel Rule only applied to transactions of fiat money, ie. Banknotes, coins, scriptural money and e-money. With the extension to crypto transactions, the traceability of these will be ensured and transactions with suspected money laundering can be better detected in the future.
The minimum transaction amount of 1000 euros discussed so far and specified by the FATF is suspended by the EU and instead provides that the data of the ordering party and recipient are collected regardless of how many crypto values are transferred. However, special requirements are to apply to transactions between service providers and non-hosted, i.e. privately held wallets. Here, the duty to provide information is to apply only for amounts of EUR 1000 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 Transfers Information Regulation to the crypto sector is a milestone in terms of regulations set in the EU. While there is also a lot of negative criticism in the crypto space regarding the new regulations; the law nevertheless provides 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.