The European Parliament has given its final approval to a comprehensive set of regulations for crypto assets, known as Markets in Crypto Assets (MiCA). The legislation received 517 votes in favor, 38 against, and 18 abstentions, making it arguably the world’s first comprehensive crypto regulatory package. MiCA aims to regulate the supervision, consumer protection, and environmental safeguards of digital assets, including cryptocurrencies like Bitcoin. The law will cover the issue and trade of assets not regulated by existing financial services laws, providing licensing for crypto service providers operating in the bloc and establishing a register for non-compliant companies. The law will also reduce the carbon footprint of cryptocurrencies, obliging larger service providers to disclose their energy consumption.
The legislation will introduce mechanisms allowing the tracing of cryptocurrency transactions, which will also apply to private crypto wallets above a certain threshold. A separate vote saw a majority of 529 members of the Parliament approve additional legislation authorizing the tracing of crypto transactions. It is meant to ensure that transfers of cryptocurrencies can “always be traced” and blocked if they are found to be suspicious. The decision applies the so-called “travel rule,” from traditional finance, to transfers of crypto assets. It implies that information on the source of the asset and its beneficiary must “travel” with the transaction and be stored on both sides. These provisions will also cover transactions from crypto addresses of private users, the so-called “self-hosted wallets,” if they exceed €1,000 (approx. $1,100) in fiat equivalent and when they transact with “hosted” wallets managed by service providers. However, the rules will not apply to direct person-to-person transfers, those without the involvement of a provider, or transfers carried out among providers as long as they act on their own behalf, the European Parliament noted in the announcement.
The law was informally agreed upon with the Council, EU’s decision-making body, in June 2022. Commenting on the adoption of the legal framework, the rapporteur for the legislation, Stefan Berger, said that MiCA will protect consumers against fraud and allow the sector, hurt by negative events such as the collapse of crypto exchange FTX and other players, to regain trust. Berger pointed out that the crypto industry in the European Union will have regulatory clarity that does not exist in other jurisdictions like the United States. MiCA will enter into force once formally endorsed by the Council and 20 days after its publication in the EU Official Journal.
The EU’s new common rules for the crypto space are groundbreaking and will bring regulatory clarity to the crypto industry in the European Union. The legislation will protect consumers against fraud and allow the sector to regain trust. The rules will cover the issue and trade of assets not regulated by existing financial services laws, providing licensing for crypto service providers operating in the bloc and establishing a register for non-compliant companies. The law will also reduce the carbon footprint of cryptocurrencies, obliging larger service providers to disclose their energy consumption.
The introduction of mechanisms allowing the tracing of cryptocurrency transactions is significant, as it will ensure that transfers of cryptocurrencies can “always be traced” and blocked if they are found to be suspicious. The decision applies the so-called “travel rule,” from traditional finance, to transfers of crypto assets. These provisions will also cover transactions from crypto addresses of private users, the so-called “self-hosted wallets,” if they exceed €1,000 (approx. $1,100) in fiat equivalent and when they transact with “hosted” wallets managed by service providers.
The law will provide regulatory clarity that does not exist in other jurisdictions like the United States. It will protect consumers against fraud and allow the sector to regain trust. The rules will cover the issue and trade of assets not regulated by existing financial services laws, providing licensing for crypto service providers operating in the bloc and establishing a register for non-compliant companies. The legislation will reduce the carbon footprint of cryptocurrencies, obliging larger service providers to disclose their energy consumption.
The EU’s groundbreaking crypto assets legislation is a significant step forward for the regulation of digital assets. The legislation will provide regulatory clarity to the crypto industry in the European Union and protect consumers against fraud. The introduction of mechanisms allowing the tracing of cryptocurrency transactions will ensure that transfers of cryptocurrencies can “always be traced” and blocked if they are found to be suspicious. The legislation will cover the issue and trade of assets not regulated by existing financial services laws, providing licensing for crypto service providers operating in the bloc and establishing a register for non-compliant companies. The law will also reduce the carbon footprint of cryptocurrencies, obliging larger service providers to disclose their energy consumption.
