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EU Official: Crypto Regulation Will Prevent Crashes Like Terra

 


With the rapid growth of the crypto industry, regulators worldwide are looking for ways to regulate the space, including the European Union, which recently unveiled its form of crypto regulation called Markets in Crypto Assets (MiCA).


Once passed, the law will introduce several changes to the market, including stricter requirements aimed at preventing Terra-like crashes. It will also include NFTs, said the European Commission's adviser on innovation and cybersecurity policy.


Speaking at Korea Blockchain Week, EC's advisor explained that the $40 billion Terra ecosystem collapse would not have happened under the terms of the MiCA law, which requires stablecoin projects to be more transparent and allow for customer withdrawals on demand .


As Kerstens explained:


“We don't want people to blow up the system or just go broke without recourse, like we saw recently with Terra (LUNA) just melting away. (…) MiCA prevents such systems from coming onto the market.”


NFTs are also covered under the MiCA law, as Kerstens stressed that EU legislators have a very narrow view of what an NFT is.


"If a token is issued as a collection or as a series - although the issuer may refer to it as an NFT, and although each individual token in that series may be unique - it is not considered an NFT, so the requirements apply."


The new law will require issuers of NFTs to publish a white paper detailing the underlying protocol and prohibits them from making misleading and overly promising claims about their future value.


The MiCA draft law and all rules and requirements proposed with it are scheduled to come into force in 2023, but are not expected to become fully effective across the EU before 2024.


The deadlines prompted the President of the European Central Bank (ECB), Laura Noonan, to issue an urgent warning to eurozone countries in early July about the dangers of potentially overtaking national regulators with the law.

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