After a prolonged wait, the European Parliament has approved the world’s first comprehensive cryptocurrency regulation to be adopted within the European Union (EU) zone. The new guidelines will require digital asset service providers to register with the EU regulator and to comply with transparency rules and consumer protection within the region.
Importance Of The MiCA Legislation
The Markets in Crypto Asset (MiCA) regulation aims for legal clarity and to curb the risks associated with digital asset transactions while enhancing innovation in the virtual asset ecosystem. The MiCA rules were birthed from the efforts of decision-makers of the European Commission to address the challenges posed by the increasing adoption of crypto assets within the EU bloc.
Accordingly, the latest move by the EU will likely set a precedence for other jurisdictions regarding crypto regulation. However, the MiCA legislation will probably come into effect in 2024 to give crypto firms enough time to prepare for the implementation of the rules.
Voting favoring the MiCA regulation attracted 517 votes against 38 opposing ones. Once implemented, the MiCA rules will help mitigate the risks involved in buying and trading crypto assets, and service providers will be liable if investors lose funds.
Furthermore, the new rule will impose several requirements for crypto exchanges, token issuers, and other traders. They will be subjected to disclosure, transparency, and authorization by the regulator, according to the EU Parliament.
In addition, crypto trading platforms must reveal to consumers the risks of investing in digital assets. Also, the new laws will scrutinize fresh token sales.
Furthermore, stablecoins like USDT and USDC must have sufficient reserves to meet potential investors’ redemption requests. Stablecoins with significant daily withdrawal requests will be limited to 200 million euros or $220 million worth of everyday transactions.
Similarly, stablecoins not backed by the euros as a medium of exchange will have one significant restriction. They will be pegged to a quarterly average of €200 million worth of transactions daily and 1 million transactions a day.
Meanwhile, the regulation will also empower the European Securities and Markets Authority (ESMA) to oversee the activities of crypto trading platforms and ensure compliance.
What To Know
The latest move puts the EU ahead of the United States and the United Kingdom regarding their readiness to develop and implement rules for the crypto sector. However, a UK official revealed that crypto regulations are in the pipeline and could be effective within the year or the next.
Once MiCA comes into full force, crypto trading platforms can use a single license to operate in other EU member states. Although, the service providers would be required to comply with the national laws of their country of operations.
Since news of the MiCA vote became public knowledge, crypto exchanges are reportedly scrambling to obtain European licenses. Some are opening shops in the region in anticipation of the new law coming into effect next year.
US-based crypto companies have been looking at European expansion in response to the aggressive enforcement orders against them by the country’s Securities and Exchange Commission (SEC). After the SEC issued a Wells Notice to America’s largest crypto exchange, Coinbase, its CEO Brian Armstrong noted that the firm is prepared for a prolonged legal battle with the regulator.
According to Armstrong, the United States can become the leading destination for crypto platforms but needs more regulatory clarity. He added that Coinbase would explore other jurisdictions by moving its operations out of the US if this regulatory scrutiny continues.
Several crypto exchanges like Binance have voiced their willingness to adjust their operations to comply with the new MiCA regulation once implemented. Meanwhile, the Binance CEO, Changpeng Zhao, has hailed the MiCA regulation as a “pragmatic solution” to the challenges faced by the crypto sector.
Tokenhell produces content exposure for over 5,000 crypto companies and you can be one of them too! Contact at info@tokenhell.com if you have any questions. Cryptocurrencies are highly volatile, conduct your own research before making any investment decisions. Some of the posts on this website are guest posts or paid posts that are not written by Tokenhell authors (namely Crypto Cable , Sponsored Articles and Press Release content) and the views expressed in these types of posts do not reflect the views of this website. Tokenhell is not responsible for the content, accuracy, quality, advertising, products or any other content or banners (ad space) posted on the site. Read full terms and conditions / disclaimer.
