The European Union (EU) has zeroed in on new crypto legislation. It is titled MiCA (Markets in Crypto Assets), and it’s the sweeping regulatory framework covering digital assets and service providers. On June 23, 2022, representatives of institutional bodies across the EU agreed to implement MiCA legislation across the bloc’s 27 member countries.
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The need for regulatory frameworks for cryptocurrency has been among the most talked-about topics in recent years, while several countries are still trying to chisel out a framework.
While MiCA was first proposed in 2020, the European Commission, member states of the European Union, and EU policymakers had been in talks to reach a common consensus on the new set of rules for almost two years.
Following the successful agreement, Stefan Berger, the parliamentarian overseeing MiCA, tweeted, “Breakthrough! Europe is the first continent with crypto-asset regulation. Parliament, Commission & Council have agreed on a balanced MiCA.”
What is the MiCa Regulation?
Dubbed the EU’s landmark crypto law, the Markets in Crypto Assets (MiCA) regulation represents a set of new guidelines designed to protect investors. Under the new rules, exchanges, brokers, and other crypto asset service providers (CSPs) must follow strict procedures to ensure investor safety. This move comes at the heels of recent events like the Terra stablecoin crash and the ongoing liquidation of crypto hedge funds.
Policymakers have dedicated sizable guidelines to restrict the unregulated issuance and proliferation of stablecoins. Additionally, it requires all cryptocurrency issuers to publish a white paper, register with the concerned authorities, and maintain traditional bank-like reserves for stablecoins. As a result, stablecoins like USDT and USDC must now maintain ample bank-style reserves to meet investors’ withdrawal requests.
MiCA establishes new standards for crypto regulation, as it aims to offer CSPs a “passport” to serve customers across the European Union while obliging them to meet “strong requirements to protect consumer’s wallets and become liable in case they lose investors.”
On top of this, the MiCA framework suggests that each member country’s national regulatory authorities will be responsible for issuing “passports” to CSPs. Moreover, the regulatory bodies will have to regularly notify the ESMA (European Securities and Markets Authority) about the authorization of large-scale crypto service providers.
A Positive Development for Crypto
MiCA is being widely acknowledged as a positive development by the crypto community since it can boost credibility, aid crypto adoption by conventional banks and financial institutions, and offer crypto companies a single license to operate across all member states.
At the same time, many industry participants are anxious to learn how these new guidelines will cover decentralized finance (DeFi), non-fungible tokens (NFTs), and limit the environmental impact of PoW (proof-of-work) mining.
