- Last week, the EU parliament’s Economic and Monetary Affairs Committee voted in favor of a new draft of the Markets in Crypto Assets (MiCA) framework.
- It promises to make it easier for crypto firms to expand throughout the EU’s 27 member states by facilitating a “passportable” license that would be valid between countries.
- The MiCA draft will now move on to further negotiations with EU governing bodies.
In late 2020, the European Union (EU) introduced an all-encompassing set of regulations covering the trading of digital assets across the 27-nation bloc. Known as the Markets in Crypto-Assets (MiCA), the proposed legislation acts as an oversight and regulation of digital, blockchain-based assets. Despite its lengthy timeline, last week, the EU landmark regulatory framework passed another threshold on its way to ratification.
The EU parliament’s Economic and Monetary Affairs Committee voted 31-4 in favor of the new MiCA framework draft last Monday, aimed to boost users’ confidence and support the development of digital services and alternative payment instruments. The MiCA encompasses cryptocurrencies like bitcoin and ether broadly, along with stablecoins.
The proposed framework would not apply to digital currencies issued by central banks (CBDCs) nor crypto assets such as security tokens that might qualify as financial instruments like securities, deposits, treasury bills or derivatives. At this point, the MiCA broadly captures the issuance and trading of cryptocurrencies, and promises to make it easier for crypto firms to expand throughout the EU’s 27 member states by facilitating a “passportable” license that would be valid between countries.
Once adopted and in force, the MiCA will be directly applicable law in all EU member states and regulate all issuers and service providers dealing with crypto-assets. Under the MiCA, the MEPs want the European Securities and Markets Authority (ESMA) to supervise the issuance of asset-referenced tokens, whereas the European Banking Authority (EBA) will be in charge of supervising electronic money tokens.
A wind of change within the crypto industry in the EU
To simplify, in the EU, the combination of a lack of applicable law, increasing regulatory fragmentation within the bloc, and a maturing crypto sector forced the Commission to act. Due to the size and relevance of the EU internal market with its nearly 450 million customers, the MiCA, as experts put it, can potentially set global standards and shape regulation internationally, similar to what the General Data Protection Regulation (GDPR) has achieved in the data protection sector.
That said, under the MiCA, key provisions agreed by MEPs for those issuing and trading crypto-assets, covers transparency, disclosure, authorisation and supervision of transactions. “Consumers would be better informed about risks, costs and charges. In addition, the legal framework supports market integrity and financial stability by regulating public offers of crypto-assets,” an official statement on Monday’s vote shows.
The EU also agreed on measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. The lead MEP Stefan Berger reckon “By adopting the MiCA report, the European Parliament has paved the way for an innovation-friendly crypto-regulation that can set standards worldwide.”
Berger emphasized that the regulation being created is pioneering in terms of innovation, consumer protection, legal certainty and the establishment of reliable supervisory structures in the field of crypto-assets. Many countries around the world will now take a close look at MiCA.”
Eu wants to address environmental threats too
Interestingly, the bloc even considered environmental threats that come hand in hand with crypto adoption. Prior to this, the committee voted to remove a provision that sought to limit the use of cryptocurrencies that rely on the energy-intensive consensus mechanism known as proof-of-work. The rule could have, in effect, banned the popular cryptocurrency bitcoin (BTC) across the EU.
Instead, the committee voted in favor of an alternative provision that would require the European Commission, the body in charge of proposing new legislation, to come up with a “a legislative proposal to include in the EU taxonomy (a classification system) for sustainable activities any crypto-asset mining activities that contribute substantially to climate change, by January 1, 2025.”
The MEPs even stressed that other industries like the video games and entertainment industry as well as data centers, also consume energy resources that are not climate-friendly. They call for the Commission to work on legislation addressing these issues across different sectors.
Hereon, the MiCA draft will move on to further negotiations with EU governing bodies. Since the nature of the EU is different–27 different member states with different legal and tax systems that are not harmonized– a unique approach to policy making is needed.
4 October 2022