European Union policymakers have reached an agreement on what will become the first major regulatory framework for the cryptocurrency industry.
This comes after the Council’s presidency and the European Parliament reached a provisional agreement on the Markets in Crypto-Assets (MiCA) proposal which covers issuers of unbacked crypto-assets and stablecoins as well as the trading venues and the wallets where crypto-assets are held.
According to CNBC, under the new regulations, stablecoin issuers such as Tether and Circle will be required to maintain reserves to meet any mass redemption requests. They could also face limits of 200 million Euros in daily transactions.
The regulatory framework also aims to bring more clarity to the European Union (EU), as some member states already have national legislation for crypto-assets, but there has not yet been a specific regulatory framework at the EU level. It also aims to protect investors and maintain financial stability while allowing innovation and fostering the attractiveness of the crypto-asset sector.
Furthermore, European Parliament policymaker Stefan Berger labeled the industry the ‘Wild West’ vowing to clean it up.
He said, “We put an order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors.”
Some of the new rules include:
- Crypto-asset service providers will have to respect strong requirements to protect consumers’ wallets and become liable in case they lose investors’ crypto-assets. MiCA will also cover any type of market abuse related to any type of transaction or service, notably for market manipulation and insider dealing.
- Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint.
- MiCA requires that the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant crypto-asset service providers.
- Crypto-asset service providers, whose parent company is located in countries listed on the EU list of third countries considered at high risk for anti-money laundering activities, as well as on the EU list of non-cooperative jurisdictions for tax purposes will be required to implement enhanced checks in line with the EU AML framework.
There will also be environmental regulations, with crypto firms having to disclose their energy consumption. Additionally, they will have to detail how tokens impact the environment, which is unlikely to bode well for proof-of-work cryptocurrencies. A previous proposal to ban PoW mining in the EU was voted down in March.
Regulators were also concerned about anonymity and privacy-focused crypto assets, agreeing to reduce anonymity for such transactions.
Additionally, there will be a 1,000 Euro limit for transactions between exchanges and individual un-hosted wallets; anything above this must be reported to the authorities.