The European Parliament has approved the world’s first comprehensive set of rules aimed at regulating the cryptocurrency industry. The Markets in Crypto Act, or MiCA, seeks to reduce risks for consumers buying crypto assets by imposing requirements on crypto platforms, token issuers, and traders around transparency, disclosure, authorization, and supervision of transactions. The legislation, which passed with 517 votes in favor and 38 against, means providers can become liable if they lose investors’ crypto-assets. The European Securities and Markets Authority (ESMA) will be given powers to ban or restrict crypto platforms if they fail to protect investors or threaten market integrity or financial stability.
The rules will also address environmental concerns surrounding crypto, with firms forced to disclose their energy consumption and the impact of digital assets on the environment.
Stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. Stablecoins that become too large also face being limited to €200m ($220m) in transactions per day.
In addition to MiCA, Parliament also passed the Transfer of Funds regulation, which applies the so-called “travel rule” to crypto transactions to help combat money laundering.
Financial companies will be required to screen, record, and communicate information on both sender and recipient to reduce anonymity involved in transfers of cryptocurrencies like bitcoin and stablecoins.
The EU laws put the region ahead of the US and UK, which are yet to bring in formal rules for the crypto space. Once the EU laws come into effect, crypto companies will be able to use their licenses in one European country to “passport” their services across various member states.
The impact of the new cryptocurrency regulations passed by the European Parliament is expected to be significant.
The rules are the world’s first comprehensive package of regulations aimed at regulating the cryptocurrency industry and will impose a number of requirements on crypto platforms, token issuers, and traders.
One of the key impacts is that the legislation seeks to reduce risks for consumers buying crypto assets, meaning that providers can become liable if they lose investors’ crypto-assets. This will likely lead to increased caution and diligence on the part of providers, leading to more secure and trustworthy platforms for users.
Stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests, reducing the risk of mass withdrawals leading to instability in the market.
The limit on transactions per day for stablecoins that become too large will also help prevent excessive volatility in the market.
The European Securities and Markets Authority (ESMA) being given powers to ban or restrict crypto platforms if they fail to protect investors or threaten market integrity or financial stability will further increase confidence in the market.
Moreover, the new laws will also address environmental concerns surrounding crypto, with firms forced to disclose their energy consumption and the impact of digital assets on the environment. This will encourage the adoption of more sustainable practices in the industry.
Finally, the Transfer of Funds regulation will reduce anonymity involved in transfers of cryptocurrencies like bitcoin and stablecoins, making it harder for criminal activities such as money laundering to take place. However, this may be seen as controversial by some crypto enthusiasts who value privacy and anonymity.
Overall, the impact of the new laws is expected to be positive, leading to a more secure and trustworthy cryptocurrency industry that is better able to protect consumers and reduce risks.
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