The European Union (EU) has now finally agreed on a “pioneering” crypto legal framework, which combines both crypto publishers and crypto service providers in a comprehensive set of rules.
The German EU parliamentarian Dr. Stefan Berger, also known to Cointelegraph readers as the “ Bitcoin Guardian Angel” who , as rapporteur for MiCA, was instrumental in negotiating the draft law, proudly proclaiming “Breakthrough!” on Twitter, making Europe “the first continent” with a “balanced” full crypto regulation.
Dubbed Markets in Crypto-Assets (MiCA), the regulatory framework includes a plethora of regulations ranging from unsecured cryptocurrencies and stablecoins to crypto exchanges and crypto wallets, as the official press release explains.
French Economy and Finance Minister Bruno Le Maire believes that “the landmark regulation will put an end to the Wild West that has ruled crypto assets and will solidify the EU’s role as a norm-setter on digital issues.”
Stable framework for stablecoins
Consumer protection has top priority in the MiCA, so it is hardly surprising that against the background of the high-profile collapse of the blockchain project Terra and the associated stablecoin TerraUSD (UST), the (value) stable cryptocurrencies have come into focus all the more. Accordingly, stablecoin issuers will be obliged in future to have “sufficient liquid reserves in a ratio of 1:1” in reserve.
In this context, EU parliamentarian Ernest Urtasun explains on Twitter that these reserves "must be legally and commercially separate from one another" and should also offer "complete protection in the event of insolvency".
In addition, a maximum transaction volume of EUR 200 million per day is stipulated for stablecoins.
This point in particular has already caused great astonishment in the crypto community, because the daily trading volume of the leading stablecoins is already much higher. Tether ( USDT ) is trading at $50.4 billion and USD Coin ( USDC ) at $5.66 billion per day.
Even for decentralized stablecoins like the Dai ( DAI ), the new requirements would probably hardly be met.
Interestingly, the MiCA were adopted on the same day that crypto company Circle launched a first major euro stablecoin (EUROC).
Consumer protection is key
As already mentioned, consumer protection is of great importance in the new EU regulation, so crypto service providers - defined in the legal text as so-called Crypto-Asset Service Providers (CASPs) - are also bound by strict requirements and are obliged to take responsibility.
According to Urtasun, trading platforms are required to provide a white paper for any cryptocurrency that does not have a clear issuer. This should also affect the market leader Bitcoin ( BTC ). The crypto exchanges are even liable for misleading information in the project descriptions.
In this context, there should also be clear warnings for consumers about the risks involved in trading cryptocurrencies, and strict standards are also planned for marketing.
Another important issue that the MiCA addresses is market manipulation and insider trading. To that end, the European Council writes:
"The MiCA also extends to all types of market abuse related to any transaction or service of any kind, in particular market manipulation and insider dealing."
ESMA wields the scepter
In order to be allowed to start operations within the European Union at all, the crypto service providers (CASPs) must obtain the appropriate approval from the responsible supervisory authority, the European Securities and Markets Authority (ESMA).
The authority, which was founded in January 2011, will in future be the highest authority directly responsible for supervising the European crypto markets.
Furthermore, it should be noted that the new legal framework contains neither a ban on the controversial Proof-of-Work (PoW) consensus process - which would indirectly mean a Bitcoin ban - nor regulatory provisions for Non-Fungible Tokens (NFT).
After all, the European Commission has already announced that it intends to address the issue of NFTs in the next 18 months and may very soon be able to submit a legislative proposal for the hyped asset class that fits the MiCA.
"The new European crypto legal framework will become for crypto what the European General Data Protection Regulation (GDPR) is for data protection," as a spokesman for Circle classifies the scope of the regulation.
Initially, the legal framework still has the status of a draft and must now again go through the European Council and the European Parliament before the regulation can finally come into force.
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