EU agrees rules to tame ‘Wild West’ crypto market
Cryptocurrency firms need a license and customer guarantees to issue and sell digital tokens in the European Union under groundbreaking new rules agreed upon by the bloc to tame a volatile “Wild West” market.
Globally, crypto assets are largely unregulated, with national operators in the EU only needing to show checks to fight money laundering.
Representatives of the European Parliament and EU states struck a deal late Thursday on the Markets in Crypto Assets (MiCA) law.
“Today we are bringing order to the Wild West of crypto assets and setting clear rules for a harmonized market,” said Stefan Berger, a center-right lawmaker who led the negotiations on behalf of parliament.
“The recent decline in the value of digital currencies shows us how risky and speculative they are and that trading is fundamentally important,” Berger said.
Crypto markets have collapsed this year, under pressure from the collapse of the terraUSD stablecoin and major US cryptocurrency lender Celsius Network freezing withdrawals and transfers.
Bitcoin, the largest token, has fallen by about 70% since its all-time high of $69,000 in November, pushing the overall market down.
Protecting consumers
The landmark regulation reaffirms the EU’s role as a standard-setter for digital issues, EU states said.
“With the new rules, crypto asset service providers will have to comply with strict requirements to protect consumers’ wallets and be held liable in the event that they lose investors’ crypto assets,” she added.
The deal must be formally approved by the European Parliament and EU countries to become law, followed by an implementation period.
The new law gives crypto asset issuers and providers of related services a “passport” to serve customers across the EU from a single base.
Holders of stablecoins – a type of crypto designed to maintain a constant value – are offered a claim anytime and for free by the issuer, with all stablecoins supervised by the bloc’s banking watchdog EBA.
Robert Kopitsch, secretary general of the Blockchain for Europe lobby group that includes major exchanges Binance and Crypto.com, said the rules were “a mixed bag”.
“Thanks to last-minute changes, we also fear that stablecoins will basically have no ways to be profitable,” Kopitsch said.
AFME, a financial markets industry body, said the rules would provide certainty, reduce fragmentation and support the development of a robust and well-functioning market.
However, more clarity is needed to ensure that crypto-asset custodians are only on the hook for negligence or misconduct, and not for events beyond a custodian’s control, such as a nation-state hack, according to AFME.
NFT Compromise:
Many states, including Ireland, Lithuania and Greece, have long opposed the inclusion of non-fungible tokens (NFTs), digital assets that represent objects from art to videos.
But, under pressure from EU lawmakers, the compromise reached Thursday evening foresees that “NFTs will be excluded from the scope, unless they fall under existing crypto asset classes”.
Brussels will assess within 18 months whether stand-alone rules are necessary for NFTs.
National regulators will be responsible for licensing crypto companies, but they will have to keep the EU’s securities watchdog, ESMA, informed about major operators.
ESMA will develop standards for crypto companies to disclose information about their environmental and climate footprints.
The United States and Britain, two major crypto centers, have yet to approve similar rules.
The company behind the major stablecoin USD Coin called the rules “an important milestone.”
“While no comprehensive set of rules is perfect, it nevertheless offers practical solutions to problems that other jurisdictions are just beginning to grapple with,” US company Circle said in a blog.
