The European Union agrees to deal with the MiCA cryptocurrency regulation

European Union officials on Thursday reached agreement on what is likely to be the first major regulatory framework for the cryptocurrency industry.

The European Commission, EU lawmakers and member states reached an agreement in Brussels after hours of negotiations. The move came a day after the three main European Union institutions ended measures aimed at eliminating money laundering in cryptocurrencies.

The new rules agreed on Thursday come at a difficult time for digital assets, as Bitcoin faces that The worst quarter in over a decade.

Known as Markets in Crypto-Assets, or MiCA, the landmark legislation will make life more difficult for many players in the cryptocurrency market, including exchanges and issuers of so-called Stablecoins, tokens that are supposed to be tied to existing assets such as the US dollar. .

stablecoins like Rope and circle USDC Sufficient reserves will be required to meet redemption requests in the event of mass withdrawals. They also face a limit on transactions worth €200 million per day if it becomes too large.

While EU member states will be the main enforcers of the rules, the European Securities and Markets Authority, or ESMA, is also given the power to step in to ban or restrict crypto platforms if they threaten investor protection, market integrity or financial stability.

“Today, we have put the system in place in the wild west for crypto assets and established clear rules for a harmonized market that provides legal certainty to issuers of crypto assets, ensures equal rights for service providers and ensures high standards for consumers and investors,” said Stefan Berger, the lawmaker who led the negotiations on behalf of the European Parliament.

MiCA will also address environmental concerns surrounding cryptocurrencies, with companies required to disclose their energy consumption as well as the environmental impact of digital assets.

The previous proposal had scrapped cryptocurrency mining, the energy-intensive process of minting new units of bitcoin and other tokens. However, lawmakers voted on this in March.

The rules will not affect tokens without issuers, such as BitcoinHowever, trading platforms will need to warn consumers about the risks of losses associated with trading digital tokens.

Regulators have also approved measures that will reduce anonymity when it comes to certain crypto transactions.

Authorities are deeply concerned about the exploitation of crypto assets to launder illicit gains and evade sanctions — especially after the ongoing Russian invasion of Ukraine.

Transfers between exchanges and so-called “non-hosted wallets” owned by individuals must be reported if the amount exceeds the €1,000 threshold, a controversial issue for crypto enthusiasts who trade cryptocurrencies often for privacy reasons.

Non-fungible tokens (NFTs), tokens that represent property in digital property such as art, have been excluded from offerings. The EU Commission has been given the task of determining whether NFTs require their own regime within 18 months.

rules follow terraUSD collapse, the so-called “algorithm” stablecoin that attempted to maintain the value of $1 using a complex algorithm. resulting from the catastrophe Hundreds of billions of dollars They have been erased from the entire crypto market.

“The European Union is not happy about stablecoins in general,” said Robert Kubic, general secretary of crypto lobby group Blockchain for Europe.

Policy makers have been skeptical about such tokens — which are meant to be tied to existing assets, such as the dollar — since Facebook Failed attempt to launch its own code In 2019. Authorities feared that private cryptocurrencies would end up threatening sovereign currencies such as euro.

Paolo Arduino, chief technology officer of Tether, said the world’s largest stablecoin issuer welcomes regulatory clarity.

“MiCA is one of the most advanced initiatives to date focused on driving cryptocurrency innovation and adoption in the European region,” the spokesperson said.

Dante Disparte, chief strategist at Circle, said the EU framework represented an “important milestone”.

He said MiCA would “encrypt what GDPR means to privacy,” referring to the European Union’s leading data protection rules that set the standard Similar laws elsewhere in the world, including California and Brazil.

Coinbase is Seeking licenses in several European countries Including France, said Catherine Minarek, the company’s vice president of legal affairs. She told CNBC that the exchange will be able to “passport” its services to all 27 EU countries under MiCA.