World’s first cryptocurrency regulations by the EU Parliament

The Markets in Crypto Act (MiCA), popularly called the “world’s most sweeping cryptocurrency rules,” has been passed by the EU Parliament. 

According to the EU Parliament, the law would impose a variety of obligations on cryptocurrency platforms, token issuers, and dealers including transparency, disclosure, authorization, and supervision of transactions, with a focus on lowering risks for consumers. 

The regulations will apply to crypto assets, such as digital money like Bitcoin and Ethereum, as well as tradeable tokens like NFTs, whose value is secured by blockchain technology. 

The Transfer of Funds legislation was approved by the European Parliament by a vote of 529 – 29 with 14 abstentions. This distinct rule demands cryptocurrency providers identify their consumers to prevent money laundering.

According to Mairead McGuinness of the European Commission, “We are defending market integrity, financial stability, and consumer protection.” “The regulations will take effect the following year.”

Platforms will have to tell customers about the dangers involved in their business operations as part of the new regulations. Additionally, stablecoins will need to have enough reserves on hand to fulfill redemption requests in the case of large-scale withdrawals. 

MiCA also addresses the environmental issues raised by cryptocurrencies by requiring businesses to disclose both their energy usage and the environmental effects of their digital assets. The Cambridge Bitcoin Power Consumption Index estimates that the yearly power use of just Bitcoin is projected to be 26.73 terawatt-hours, which is greater than the combined annual electricity use of nations like the Netherlands, Argentina, or the United Arab Emirates.

The regulation, according to EU legislator Ernest Urtasun, “marks the end of the Wild West era for the unregulated world of crypto-assets.”

The organization in charge of ensuring compliance with these regulations is the European Securities and Markets Authority, which will also have the authority to intervene and impose restrictions on crypto platforms if it seems that they do not adequately safeguard investors or pose a risk to the integrity of the market or the stability of the financial system.

With 10,000 unique crypto assets, this positions the EU at the forefront of the token economy, according to EU lawmaker Stefan Berger, who oversaw the MiCA discussions. “Consumers will be safeguarded from fraud and deceit, and the industry that was harmed by the FTX collapse may rebuild trust.”

 “Consumers will have access to all the information they require, and the underlying dangers associated with crypto assets will need to be closely watched. We made sure that buyers of crypto assets would consider the environmental effect information. The EU gains a competitive advantage from this rule. There is regulatory certainty in the European crypto asset market that is lacking in nations like the US.”

Cryptocurrency assets are highly volatile and mostly unregulated on a global scale. This was made clear last summer when the failure of the terraced stablecoin resulted in a lack of confidence in the market, causing bitcoin to have its worst quarter in more than ten years and the major US crypto lender Celsius Network to halt withdrawals and transfers.

Binance CEO Changpeng Zhao praised MiCA as a “pragmatic solution to the challenges we collectively face” and said that his firm was “ready to make adjustments to our business over the next 12-18 months to be in a position of full compliance.” Binance is one of the biggest cryptocurrency exchanges.

These regulations may have an impact on the two major crypto hubs in the US and the UK because officials in both nations have stressed the importance of tighter regulations for the industry. To control some of the careless business practices that define the “turbulent industry,” the UK government earlier this year revealed intentions to regulate the cryptocurrency market. 

Following the failure of the crypto platform FTX and the stable currencies Terra and Luna, calls for increased regulatory control over the US’s crypto sector have become stronger. This is when Europe passed its groundbreaking law.

Although several US federal agencies and authorities, including the Securities and Exchange Commission, Commodity Futures Trading Commission, and Treasury, have published regulations and guidelines for conducting business in the cryptocurrency market, there is no overall framework for cryptocurrencies.