EU Presses On With Crypto-Regulation
By Laxmikant Khanvilkar
While the jury is still out on the possible influence of regulation on cryptocurrencies or the virtual digital assets (VDAs), the European Union has taken a lead in bringing this highly volatile and the most preferred medium used in tax evasion, money laundering and financing illicit trade as well as activities including terror funding, under the regulatory ambit.
On April 20th, the European Parliament approved the world’s first set of comprehensive regulation on cryptocurrencies, known as the Markets in Crypto Assets (MiCA) Act. The act aims at providing legal clarity and reduce risks associated with cryptocurrencies while supporting innovation in the sector.
The EU Parliament voted by 517 in favour and 38 against to approve the world’s first comprehensive set of regulations for issuing and trading virtual digital assets such as Bitcoin.
The new rules are set to come into effect in 2024, providing companies with ample time to prepare and comply with the regulations. The MiCA Act requires digital asset service providers to register with regulators, comply with rules on transparency and customer protection, establish requirements for stablecoins, and prohibit anonymous transactions.
Stablecoins such as Tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals.
Transaction limit of 200 million euros ($220 million) in transactions per day. The transaction volumes of stablecoins (not pegged to the euro) as a medium of exchange must remain below the quarterly average of EUR 200 million per day and 1 million transactions per day.
Europe – the world’s largest cryptocurrency market – aims to ensure traceability of every crypto transfer. Hence, transfers between exchanges and self-hosted wallets owned by individuals will need to be reported if the amount tops the 1,000-euro threshold.
The European Securities and Markets Authority (ESMA) will be given powers to step in and ban or restrict crypto platforms if they are seen to not properly protect investors or threaten market integrity or financial stability.
MiCA also addresses environmental concerns surrounding crypto, with firms forced to disclose their energy consumption as well as the impact of digital assets on the environment.
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