On Monday, October 11th, European Union (EU) lawmakers voted almost unanimously in favor of the proposal for the landmark ‘Markets in Crypto Assets‘ (MiCA) legislation, taking a huge step towards introducing crypto regulations to member states.
In a 28-to-1 vote, the European Parliament Committee on Economic and Monetary Affairs (ECON committee) approved a preliminary deal for a legal framework around cryptocurrency assets, which is projected to go into force in 2024.
MEPs from @EP_Economics voted to confirm w/ 28/1 provisional deal on markets in crypto assets #MICA @DrStefanBerger ahead of the final plenary vote
30 June deal details https://t.co/zFPKaTxki9
— ECON Committee Press (@EP_Economics) October 10, 2022
The MiCA regulatory bill introduces several requirements that crypto projects must adhere to, notably outlining that stablecoins that are not denominated in euros must be capped at one million transactions, and €200 million in terms of transaction value when marketed in the eurozone.
The bill also targets crypto mining and will mandate that crypto asset-service providers track and disclose their energy consumption in an effort to curb the environmental impact of such operations. Non-fungible tokens (NFTs) are exempt from the scope of the bill but are subject to reclassification as either a financial instrument or a crypto asset at a future date.
“In the Wild West of the crypto-world, MiCA will be a global standard setter. MiCA will ensure a harmonized market, provide legal certainty for crypto-asset issuers, guarantee a level playing field for service providers and ensure high standards for customer protection. Tokenisation will be as groundbreaking for the financial world as the introduction of the joint market was in the 17th century. With the MiCA regulation, reliable authorization and supervisory structures for new tokens are now being created for the first time,” stated MEP Stefan Berger.
The bill was first introduced in June 2022, after years in the making. EU officials are set to vote on the final approval of the legislative framework and its publication in the European Union’s Official Journal later in 2022.
After approving the proposed MiCA guidelines, EU lawmakers also agreed on a provisional deal for the ‘Transfer of Funds Regulation‘ (TFR), which includes provisions for the tracking and blocking of transactions deemed suspicious.
Plans to Monitor Defi Activity on Ethereum
Though MiCA does not include guidelines for the regulation of the decentralized finance sector, the EU has introduced separate measures aimed at examining Defi and its risks.
The European Commission has released a document detailing a proposal for a pilot project “to develop, deploy and test a technological solution for embedded supervision of Defi activity” on the Ethereum blockchain.
According to the document, the project will be focused on “automated supervisory data gathering” directly from Ethereum to be used for the testing of technology tools that could potentially monitor Defi activity in real time.
The project is estimated to run for 15 months and will cost approximately €250,000.
On the Flipside
- It’s unclear how the new regulations will affect the crypto sector as a whole. While some welcome government regulation, insisting that it will only spur on adoption, others believe it to be a slippery slope back to centralization and censorship.
- The MiCA legislation appears to be focused more on fraud prevention and environmental impact than targeting user privacy.
Why You Should Care
The MiCA framework has been in the works for more than two years. Its passage into law could become a pivotal step towards greater crypto adoption in Europe and worldwide.