Caiz Insights: EU Gives Green Light to the MiCA Regulations Bill
Legislators from the European Parliament’s largest political groups are expected to back the significant MiCA law prior to the last Thursday vote.
Keynotes:
- The EU Parliament voted 517 in favor and 38 against to pass the Markets in Crypto Act (MiCA), the most comprehensive regulatory framework for digital assets to date.
- MiCA will impose a number of requirements on crypto platforms, token issuers and traders, such as transparency, disclosure, authorization, and supervision of transactions.
- The parliamentary blessing paves the way for MiCA to become law in 2024, placing the EU a step ahead of the U.S. and U.K. in terms of crypto regulation.
The MiCA licensing policy will come into effect in Q1 of 2025.
European Parliament Approves MiCA Law Regulating Cryptocurrencies
The European Parliament has approved the Markets in Crypto Assets (MiCA) law, marking the world’s first comprehensive crypto rules. The legislation seeks to regulate the cryptocurrency industry, protect investors, and reduce risks associated with buying crypto assets. The vote was 517–38 in favor of the new cryptocurrency licensing policy, which includes a separate law requiring digital asset operators to identify their clients about any transfer of their funds to prevent money laundering.
MiCA is designed to impose stringent rules, supervision, and authorization requirements on crypto platforms, token issuers, and traders to increase transparency and protect investors. The rules include disclosure and supervision of transactions, informing consumers about associated risks, and regulating sales of new tokens. Stablecoins like Tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in case of mass withdrawals. Stablecoins that become too large also face being limited to €200 million ($220 million) in transactions per day.
Furthermore, the European Parliament Briefing report on MiCA highlights that this “regulation identifies and covers three types of crypto-assets, namely asset-referenced tokens (ART), electronic money tokens (EMT), and other crypto-assets not covered by existing EU law. The legislation would regulate issuance and trading of crypto-assets as well as the management of the underlying assets, where applicable, with additional regulatory rules aimed at ‘significant’ ART and EMT.”
The new law also addresses environmental concerns surrounding cryptocurrencies, with firms forced to disclose their energy consumption and the impact of digital assets on the environment.
The so-called “travel rule,” which has been used in traditional finance, will cover cryptocurrency transactions, providing customers with information about the source of the assets and the beneficiary. It will also apply to transfers worth above €1,000 (around $1,100) from crypto wallet addresses to private users. However, it will not cover person-to-person transactions.
Mairead McGuinness, the European Commissioner for Financial Stability, Financial Services, and the Capital Markets Union, lauded the law’s approval, stating that such standards are vital due to the multiple crashes and scandals that shuttered the industry last year. McGuinness said, “We are putting safeguards in place that would prevent companies active on the EU market from engaging in some of the practices that led certain cryptoasset operators to collapse.”
The law on stablecoins is expected to come into effect from July 2024, while the broader rules on crypto providers should become live from January 2025. The European Securities and Markets Authority (ESMA) will be given powers to step in and ban or restrict crypto platforms if they do not protect investors properly or threaten market integrity or financial stability.
Andrew Whitworth, EMEA policy director for blockchain firm Ripple, said the parliamentary blessing marked “an important milestone for the crypto industry around the world.” He added that consistency in implementation across the EU would be key in providing crypto companies with the operational clarity to fuel innovation across Europe and guard against fragmentation of the Single Market.
How will non-European crypto service providers be affected by MiCA?
For non-European crypto service providers, MiCA will only apply if they offer their services in the EU or target EU investors. If they don’t, then they are not obligated to comply with MiCA regulations. However, if they provide cross-border services into the EU, they may be required by EU national competent authorities to obtain a MiCA authorization.
Overall, the MiCA regulation is considered a positive step for the crypto industry as it provides a clearer regulatory framework and offers more protection to investors against potential financial risks.
In what way will MiCA impact AML regulations?
MiCA will serve as a complementary framework to the current Anti-Money Laundering Directive (AMLD) in the EU and establish a specific regulatory system for crypto-assets. Under MiCA, crypto-asset service providers (CASPs) will be obligated to adopt AML measures, including Customer Due Diligence and reporting of suspicious transactions. Moreover, national competent authorities will be authorized to exchange information on suspected money laundering or terrorist financing activities involving crypto-assets.
While the MiCA regulation provides more clarity to the regulatory landscape and safeguards investors from financial losses, CASPs must ensure they comply with its rules and requirements upon implementation.
What Does Caiz CEO Think of MiCA?
In his remarks on the MiCA regulation, Caiz CEO Philippe Theunissen expressed his belief that this new regulatory framework will position the EU as a leader in the token economy, with protection for consumers against fraud and deception, and monitoring of underlying risks. In this respect, the Caiz Blockchain seems to perfectly align with these emphasized regulations. Further, the regulation will also consider the environmental impact of crypto assets, giving the European crypto-asset industry a competitive advantage and regulatory clarity that does not exist in some other countries.
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