Now it’s official. The European Parliament has passed the first complete set of laws to regulate the cryptocurrency sector. The Markets in Crypto Act, or MiCA, was approved by the European Union Parliament on Thursday with 517 votes in favor and 38 votes against.
MiCA is supposed to protect investors
MiCA has been in works since the mid-2022. The legislation’s goal is to protect consumers when they invest in crypto assets by making service providers financially responsible for any losses their users may incur. This could help prevent the next FTX or Terra Luna.
The EU Parliament explained in a statement on Thursday that the new rules will put a number of criteria on crypto-related subjects. These include crypto exchanges, token issuers, and traders relating to things like transaction transparency, disclosure, authorization, and supervision.
Also read: Unclear crypto regulations may push Coinbase out of US – is it over?
New token sales will also be subject to regulation, and platforms will be compelled to warn users about the dangers of using their services. This is similar to what was happening with forex brokers, where investors entered CFDs trading without being warned of possible risks.
In the case of a large-scale withdrawal, stablecoins like Tether’s USDT and Circle’s USDC will need to keep sufficient reserves on hand. If a stablecoin gains too much traction, its daily transaction volume may be capped at 200 million euros, or $220 million. That’s interesting when we consider the fact that Tether beat Visa in transaction volume last year.
There’s no way 200 million euros will be enough. If crypto platforms are deemed to not adequately protect investors or risk market integrity or financial stability, the European Securities and Markets Authority (ESMA) will be given the authority to ban or regulate them.
While there has been a solid crackdown on the crypto space in the US, it may just be coming to the EU. MiCA also addresses crypto’s influence on the environment by requiring companies to report their energy usage and carbon footprints.
Say goodbye to anonymity?
By a vote of 529 to 29, parliament also approved the Transfer of Funds regulation. It’s a separate law that seeks to limit the anonymity of cryptocurrency transactions like Bitcoin and stablecoins.
In order to combat money laundering, this applies the so-called “travel rule.” It mandates that financial institutions screen, record, and communicate information on both sender and recipient. This is a difficult topic for people involved in crypto.
Especially for those who frequently trade digital currencies for privacy concerns. Moreover, it may be trouble for those who use exchanges and so-called “self-hosted wallets” held by individuals to move their funds.
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After a string of high-profile flops, regulators have moved to rein in the cryptocurrency sector. No one wants another FTX, Terra Luna, Three Arrows Capital, BlockFi, or Voyager Digital, which went bankrupt and infected the whole industry.
The United States and the United Kingdom have yet to enact explicit laws for the crypto area, putting the European Union ahead of them with this action. On Monday, a UK official said that cryptocurrency legislation might take effect within the next year.
Following strict regulatory actions in the US, crypto firms may have started moving abroad for growth opportunities. Wells notices are generally the last step before the SEC formally pursues charges, and that’s exactly what they were for Coinbase last month.
Overly regulative actions may seriously damage the crypto industry as it was based created on the foundation of freedom and privacy. Taking these away could impact the crypto industry in a bad way forever.
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