Authored by Naveen Athrappully via The Epoch Times (emphasis ours),
The European Union has approved a set of rules—the first such regulation in the world—to regulate crypto assets like cryptocurrencies and tokens in a bid to curb money laundering activities and protect investors.
The markets in crypto-assets (MiCA) legislation was approved on May 16 by EU ministers. The new rules will increase transparency and create a comprehensive framework for businesses operating in crypto markets, including compliance with anti-money laundering rules, according to a May 16 press release. “Recent events have confirmed the urgent need for imposing rules which will better protect Europeans who have invested in these assets, and prevent the misuse of crypto industry for the purposes of money laundering and financing of terrorism,” said Elisabeth Svantesson, Minister for Finance of Sweden.
Crypto markets have suffered in recent months due to the collapse of multiple firms. FTX, Alameda, Core Scientific, Voyager Digital, Celsius Network, BlockFi, and Three Arrows Capital are some of the major crypto companies that have filed for Chapter 11 bankruptcy and decided to liquidate their assets to pay back customers. Each of these firms is estimated to have liabilities worth billions of dollars that they owe to thousands of creditors.
MiCA was approved unanimously by members of the EU’s Economic and Financial Affairs Council (EcoFin). EcoFin represents the economic and finance ministers of all 27 EU nations.
In May last year, European Central Bank (ECB) president Christine Lagarde raised concerns about cryptocurrencies during an interview on Dutch television.
“I have said all along the crypto assets are highly speculative, very risky assets,” Lagarde told the program. “My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.”
Earlier, the ECB President had called Bitcoin a “highly speculative asset” that contributes to money laundering activity.
The Legislation
MiCA covers issuers of utility tokens, asset-referenced tokens, as well as stablecoins. Service providers like trading venues and crypto wallets also come under its purview. The legislation is on track to become law in the EU region this summer, and is expected to be rolled out from 2024.
Firms looking to issue, trade, or safeguard crypto assets in the EU bloc will have to secure a license to do so. MiCA aims to combat tax evasion and money laundering via cryptocurrencies by making transactions involving these instruments easier to trace.
Beginning January 2026, service providers in the crypto industry will have to obtain the names of senders and beneficiaries of digital assets irrespective of the amount involved in the transaction.
Entities doing business in the crypto sector will be obliged to ensure their security protocols are up to the required standard. They have to comply with stringent rules to protect consumer funds and can become liable in case the funds of investors are lost.
MiCA establishes liquidity and disclosure requirements for crypto companies. The management of a crypto firm may be fined in case they fail to make sure the reserve funds are properly managed.
US Situation
Efforts to establish comprehensive regulation in the crypto industry are also underway in the United States. In March 2022, President Joe Biden issued an executive order seeking to ensure the responsible development of digital assets.
Since then, multiple government agencies have been framing policies aimed at pushing six areas of focus outlined in the order, including protecting investors and customers, ensuring financial stability, and countering illicit finance.
In September, the Biden administration released its first-ever comprehensive framework aimed at regulating digital assets like cryptocurrencies.
In January 2023, a White House blog post highlighted some of the dangers posed by cryptocurrencies while calling on Congress to pass new laws to limit criminal activity in the sector.
Officials characterized digital assets as a promising nascent industry that needs to be reined in to protect consumers. It also asked that laws incentivizing more investment into crypto be avoided.
“Legislation should not greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets,” the blog said. “It would be a grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.”
Tyler Durden
Fri, 05/19/2023 – 02:00
