30 Indian Minds Leading the AI Revolution

EU agrees on MiCA regulations for crypto and stablecoins

Crypto asset service providers (CSPs) will need authorisation to operate in the EU

Published: Jul 1, 2022 06:34:02 PM IST

Image: Shutterstock

Officials from the EU (European Union) have agreed on a new uniform regulatory framework to regulate crypto assets and service providers, which could have a significant impact on people and platforms involved in the crypto industry.

The officials representing the world's third-largest economy have been wrangling over the MiCA (Markets in Crypto Assets) framework for two years. As of Thursday, the legislation package mandated that crypto issuers publish a form of technical manifesto known as a "white paper," register with the authorities, and retain proper bank-style reserves for stablecoins. The legislation doesn't include NFTs within its scope and doesn't put a ban on proof of work crypt of either.

Member of the European Parliament Ernest Urtasun said that the stable coin reserves have to be 'legally and operationally segregated and insulated' and will have to be 'fully protected in case of insolvency.' The stablecoin transactions per day will be capped at 200 million euros worth of transactions per day. The largest CSPs will be regulated by ESMA (European Securities and Markets authority).

European Parliament member and rapporteur for the MiCA legislation, Stefan Berger, the person appointed to report on the bill's procedures, made the announcement on Twitter, saying that a "balanced" arrangement had been reached, making the EU the first continent to have crypto-asset regulation.

However, the agreement is provisional until the Council and European parliament formally approve it and the bill moves toward adoption.

The European Commission's Mairead McGuiness also talked about the regulations, saying, "I think everybody's now aware that you can't have an unregulated sector." He added, "We're glad that we're leading on this. We do think there needs to be international cooperation because it's important that we don't regulate on our own."

McGuinness has previously advocated for the United States to collaborate on crypto regulation. There are signs that show that the U.S. government has been making plans to pass its own stablecoin legislation.

MiCA was proposed by the European Commission in September 2020 in an attempt to combat a wave of crypto fundraising schemes known as initial coin offerings (ICO) that frequently proved fraudulent. The law required consent from EU governments and lawmakers to be passed, which it has now received. The decision came amid the downfall of a major stablecoin, TerraUSD.

Crypto traders have taken to Twitter to express their criticism against the regulations, stating that the law seems "unworkable" and that the government would have to deal with a lot while trying to successfully impose these regulations on decentralised platforms.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash