European Union officials agreed on the final wording for the landmark legislation on cryptocurrencies, which could pave the way for a pan-European regulatory approach.
This development is expected to pave the way for digital assets to be adopted en masse and become part of the global financial system.
The full legal text of the Markets in Cryptocurrency Assets Regulation (MiCA) was approved at a meeting of EU ambassadors last Wednesday, according to a letter from committee chair Edita Hrdá.
In the letter addressed to the chairwoman of the European Parliament’s Economic and Monetary Affairs Committee, Irene Tingali said that cooperation between the Parliament and the Council should allow the regulation to be adopted at first reading in Parliament.
The regulation, in its current form, would require anyone seeking to issue cryptocurrencies to publish a “cryptocurrency asset white paper” containing information about their project.
Coverage of stablecoin
Stablecoin issuers, meanwhile, will be subject to certain capital requirements. This means that projects will be required to hold reserves in sovereign currencies to support the value of their coins, in an amount commensurate with the amount issued.
In addition, local authorities will have the ability to increase this amount of required capital if they deem the digital asset to be risky.
Effective 2024
The legal text will now go to the European Parliament where, subject to approval, it will likely be published in the Official Journal of the European Union early next year, with the rules coming into force in 2024.
The EUCI position
Cryptocurrency advocates welcomed the news, but said the legislation has not yet addressed several key points, including non-exchangeable digital assets (NFTs) and the future of decentralized finance (DeFi).
“THIS MARKS THE END OF AN INTENSE BUT NECESSARY DEBATE AMONG EU CO-LEGISLATORS THAT HAS BEEN ONGOING FOR MORE THAN TWO YEARS,” THE BRUSSELS-BASED EUROPEAN CRYPTO INITIATIVE (EUCI) SAID IN A STATEMENT.
The group pointed out that the big focus on stablecoin comes in response to Facebook’s Diem (formerly Libra) project and that based on that lawmakers had taken a “very defensive” approach.
EUCI added that NFTs are excluded from the scope of MiCA, creating uncertainty as to whether regulators in each EU member state will use different interpretations of these digital assets.
DeFi projects will also not be affected by the regulation, but EUCI expressed concern that these were not properly defined in the final text.
Positive impact
Despite these criticisms, EUCI co-founder Marina Markezic was optimistic about the impact MiCA will have on the industry:
“IT CREATES A BRAND NEW SET OF RULES FOR CRYPTOCURRENCY PROJECTS – ONES THAT WILL CHANGE CRYPTOCURRENCY’S CURRENT POSITION AS AN ‘OUTSIDER’ AND MAKE IT A FULL PARTICIPANT IN THE FINANCIAL SERVICES SPACE,” SHE SAID, ADDING, “AT THE SAME TIME, WE BELIEVE THAT THE INDUSTRY MUST REMAIN ABLE TO INNOVATE WITHOUT UNDUE BURDENS.”
The EU will discuss cryptocurrency rules with the US
Mairead McGuinness, the European Commissioner for Financial Services, said cryptocurrency regulation will be top of the agenda in discussions with US officials next week.
Speaking at a Bloomberg event, she said the EU is seeking to exchange views and experiences with the US at the annual meetings of the International Monetary Fund and the World Bank next week:
“I’M SURE THEY WANT TO HEAR WHAT WE DID, HOW IT WENT, WHAT THE PROBLEMS WERE. I WOULD BE VERY HAPPY TO SHARE OUR EXPERIENCE AND ALSO TO HEAR WHAT THEY ARE PLANNING TO DO IN THE US”.
McGuinness earlier this year called for a global agreement as far as regulations on cryptocurrencies in an article for the US political website The Hill:
“I believe the EU and the US together can lead to a common international approach to regulating cryptocurrencies,” she wrote at the time.
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