The European Union has approved a comprehensive set of regulations for the cryptocurrency sector, known as Markets in Crypto Assets (MiCA). The final step of the bloc’s legislative process was the adoption of the rules by the European Council on Tuesday, giving the EU a global lead in regulating the freewheeling sector. The rules are aimed at improving transparency and combating money laundering, with a particular focus on stablecoins, which are tied to a hard currency or commodity like gold, making them less volatile than regular cryptocurrencies. Other digital tokens, as well as bitcoin-related services such as trading platforms and digital wallets, are also subject to the rules.
The new regulations will require crypto companies to obtain approval to operate in the EU and be held liable if they lose investors’ assets. “Noncompliant” companies will be listed publicly, and companies issuing or trading crypto assets will have to disclose information on the risks, costs, and charges that consumers face. Additionally, major crypto companies will have to reveal how much energy they use, with concerns over the carbon footprint of bitcoin mining.
Improving Financial Stability
The EU’s tighter scrutiny of the cryptocurrency sector comes after a series of high-profile scandals, including the collapse of trading firm FTX and the implosion of the TerraUSD stablecoin. The MiCA rules are aimed at maintaining financial stability and include provisions to combat market manipulation and insider dealing. Swedish Finance Minister Elisabeth Svantesson, whose country holds the rotating presidency of the European Council, said the rules were necessary to better protect Europeans who have invested in these assets and prevent the misuse of the crypto industry for money laundering and terrorism financing.
The MiCA rules are expected to start taking effect in phases from July 2024. The US has made little progress in stepping up oversight of cryptocurrencies and digital assets, while the UK is still considering feedback on proposed crypto regulations outlined last year. Some European countries, like Germany, already have basic crypto regulations, but the MiCA regulations mark a significant step forward in comprehensive regulatory oversight of the cryptocurrency sector.