The European Union (EU) has finalized a provisional agreement chalking out the rules for regulating the cryptocurrency industry of its 27 constituent nations. The finalized set of regulations, called the “Markets in Crypto Assets” (MiCA), will become effective by 2024 after final approval. The new rules aim to protect the interests of crypto-asset service providers and consumers alike.
The new regulations will help new crypto investors in avoiding scams and frauds and bring some stability to the sector. Crypto-asset issuers and service providers will receive a single “passport” to perform their services throughout EU, while heeding all capital and consumer protection rules. Further, providers or traders of crypto-assets such as stablecoins must fulfill stringent transparency requirements. They must provide detailed information on the risks and costs that consumers face.
The new regulations also seek to address the issue of the carbon footprint of Bitcoin mining. This is because crypto-mining uses a huge amount of electricity for computer processing operations. Now, crypto companies will have to disclose their energy use and environmental impact. Note that non-fungible tokens (NFTs) are exempt from these regulations as of now. However, there is room in the new law to bring them under the purview of MiCA at a later time.
The new rules also include measures to prevent market manipulation and ML/TF. Additionally, the EU has provisionally finalized another set of rules that require cryptocurrency transactions to be subjected to the same AML/CFT regulations as conventional bank transactions. These rules would require details of both the source and the beneficiary to be stored on both sides of the transaction. Moreover, crypto companies would be obligated to share this information with authorities investigating ML/TF.