Home / Markets / Cryptocurrency /  EU law to take on crypto badlands

On 30 June, the European Parliament agreed upon a new law to regulate cryptocurrencies. The Markets in Crypto-Assets (MiCA) law is the first comprehensive regulation for cryptos, and some expect it to become a trendsetter for crypto regulation globally. Mint explains:

What is EU’s new MiCA legislation?

The MiCA law seeks to address concerns like money-laundering, protection of consumers and investors, accountability of crypto firms, stablecoins and the environmental footprint of crypto mining. Stefan Berger, one of the key lawmakers instrumental in the formation of MiCA, said it would regulate the “wild west" of crypto assets and provide legal certainty for those issuing crypto assets, while ensuring high standards for investors and consumers. It also excludes non-fungible tokens, but the EU may make a horizontal legislation for NFTs in 18 months, after a separate assessment from the European Commission (EC).

How will MiCA regulate stablecoins?

The efficacy of stablecoins, which claim to be less volatile that other cryptos, came into question after the crash of Terraform Labs’ Luna token. The MiCA would mandate that stablecoin issuers maintain minimum liquidity to provide for sudden large withdrawals by users, and the reserves must also be protected from insolvency. The European Banking Authority (EBA) has been brought in to supervise stablecoins, and the law asks stablecoin issuers to provide claims to investors free of charge. In addition, large coins which are used as a means of payment will be capped at €200 million worth of transactions per day.

Photo: Bloomberg
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Photo: Bloomberg

How will the new law regulate money laundering?

MiCA requires the EBA to maintain a public register of non-compliant crypto asset service providers (CASPs). Additional checks will be required, in line with the EU Anti-Money-Laundering (AML) framework for CASPs based in countries considered to be at high risk of laundering activities, and jurisdictions that are “non-cooperative" for EU’s tax purposes.

How does it address green concerns?

Under MiCA, crypto companies will be required to declare their environmental and climate footprint. The European Securities and Markets Authority will develop regulatory technical standards on methodologies, content and presentation of such information. The EC will also have to provide a report on the impact of crypto assets on environment, and introduction of mandatory minimum sustainability standards for mining mechanisms, especially the proof-of-work system which raises overall computing power.

Will it affect Indian regulations?

India’s crypto regulations seem to have taken a back seat at the moment. Industry executives and experts say the government and industry are more concerned about taxation. India levied a 30% tax on income from transfer of cryptos from April, and added a 1% tax deduction at source from 1 July. This, along with the overall bear market, has depressed trading volumes, and revenues of crypto exchanges. Indian regulators are also expected to consider rules being developed in the US before taking concrete decisions.




Prasid Banerjee
An engineering dropout, Prasid Banerjee has reported on technology in India for various publications. He reports on technology through text and audio, focusing on its core aspects, like consumer impact, policy and the future.
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