The European Union agreed on rules to regulate the crypto market, forcing platforms to seek authorization to operate and providing safeguards to users. The agreement still needs to go through Brussels’ legal process and might become effective before 2024. However, officials say it will make the EU the first broad region with common crypto asset regulation in the world. Some countries have national legislation governing digital assets, but these would mark the first EU-wide rules.
On the last day of the French presidency of the Council of the EU, members of the European Commission, the EU Parliament, and the Member States reached an agreement on the Markets in Crypto Assets (MiCA) regulation to regulate crypto assets and service providers. For crypto exchanges, crypto issuers, and other companies trading crypto assets, the requirements include registering as legal entities in Europe and, in many cases, submitting a white paper before they can provide services in Europe. For small- to medium businesses, there are exemptions to producing and submitting the white paper.
For stablecoin issuers, there are stricter requirements than for other crypto asset issuers, including having more funds, limitations to provide interest with stablecoins, and in some cases observing additional rules on reserves. Transfers of crypto assets will be traced and identified to prevent money laundering, terrorist financing, and other crimes. The agreement extends the so-called “travel rule”, requiring that information on the source of the asset and its beneficiary travels with the transaction and is stored on both sides of the transfer. Crypto-assets service providers (CASPs) will be obliged to provide this information to competent authorities if an investigation is conducted into money laundering and terrorist financing. ESMA will be the responsible regulator with powers to prohibit or restrict the provision of crypto assets services by CASPs.
While increasing the burden on crypto exchanges and issuers of cryptocurrencies, it will also make it easier for them to provide their services cross-border in the EU’s 27 member countries. “The EU is [the] first to introduce comprehensive rules on crypto, I hope others will follow,” said European Commissioner for Financial Services Mairead McGuinness.
