Europe reaches agreement on sweeping crypto regulation

The Council of the European Union and the European Parliament have provisionally agreed the provisions of the crypto-asset regulation bill MiCA.

MiCA trilogue: breakthrough! Europe is the first continent with crypto-asset regulation. Parliament, Commission & Council have agreed on a balanced #MiCA. For me as a reporter, it was important that there is no ban on technologies like #PoW /1

— Stefan Berger (@DrStefanBerger) June 30, 2022

The MiCA rapporteur in the European Parliament, Stefan Berger, said that the region has become the first jurisdiction with a regulatory framework for digital assets.

The bill includes rules that apply to issuers of unbacked crypto assets, issuers of stablecoins, trading and custodial platforms.

According to France’s Minister of the Economy and Finance Bruno Le Maire, the regulation will “put an end to the Wild West in the industry”.

“A harmonised across-Europe regime for crypto-asset issuers and service providers will provide security for investors and support resilience, while reducing fragmentation and increasing legal certainty,” — said MEP Ernest Urtasun.

1/13 Agreement between the EU institutions on MiCA: we will have a common harmonized EU-wide regime for crypto-asset issuers and service providers, that will provide security for investors and support sustainability, while to reducing fragmentation and increasing legal clarity. pic.twitter.com/W08V2AFNef

— Ernest Urtasun (@ernesturtasun) June 30, 2022

According to the lawmaker, MiCA will prevent episodes like Terra collapse — reserves of “stablecoins” will be segregated. Issuers will be required to comply with strict operating and prudential rules with daily transaction volume limits of €200 million.

That volume far exceeds the daily trading turnover of the most popular stablecoins such as USDT, USDC and DAI, according to CoinGecko.

Crypto-asset service providers (CASP) will be required to adhere to strict consumer-protection rules. They may be held liable in case of investor losses.

Trading platforms will face a requirement to provide a white paper and penalties for the use of misleading information.

For consumers there will be disclosures mentioning the risks of losses associated with crypto assets, for companies — rules on marketing communications.

MiCA will cover all market abuses relating to any type of transaction or service, primarily market manipulation and insider trading.

CASP will require a licence to operate in the EU. The largest crypto-asset service providers will be supervised by ESMA.

MiCA did not include a ban on Proof-of-Work.

NFTs are not within the scope of the bill. Over the next 18 months the European Commission may amend it with corresponding provisions.

The preliminary agreement for formal adoption will require approval by the European Council and the European Parliament.

In April 2022, representatives of the cryptocurrency industry urged the EU to back away from tighter regulation. 

Earlier the European Parliament backed mandatory verification of users of non-custodial crypto wallets. Amendments are provided for in the regulation governing information exchange between counterparties.

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