After months of negotiations, European Union officials have come up with a framework for regulating the cryptocurrency business.
After hours of negotiations, the European Commission, EU lawmakers, and member states reached an agreement in Brussels. Following the finalization of anti-money laundering procedures by the three major financial institutions, the move was made.
The Landmark Law
Stablecoins, which are digital coins tied to existing assets like the dollar, will be harder to come by under the landmark law known as the Market in Crypto-Assets Act (MiCA), which is aimed at making things more difficult for the many players in the crypto market.
Stablecoins like tether and Circle’s USDC will be required to retain sufficient reserves to meet redemption requests in the case of large withdrawals under the new regulations. If a stablecoin grows too large, it may be restricted to daily transactions of no more than 200 million euros.
Companies will be required to declare their energy use and the environmental impact of digital assets under MiCA, which also addresses crypto’s environmental concerns.
Effect on Tokens
Tokens without issuers, such as bitcoin, will be unaffected by the laws, although trading platforms must educate customers about the risks of trading digital tokens.
The ideas did not include NFTs, which reflect ownership of digital assets such as art. Within 18 months, the EU Commission will determine if NFTs need their own regulatory framework.
Another set of regulations was approved Wednesday that would limit the privacy of some crypto transactions. Crypto assets are being used to launder money and evade sanctions by criminals and terrorists.
The 1,000-euro threshold for reporting transactions between exchanges and “un-hosted wallets” owned by individuals is a thorny subject for crypto aficionados who frequently trade digital currencies for privacy concerns.
After terra USD, a “stablecoin” that aimed to maintain a $1 value via a sophisticated algorithm, collapsed, and new guidelines were established. Due to the meltdown, the crypto market lost hundreds of billions of dollars.
Since Facebook’s disastrous launch of its own token in 2019, policymakers have been cautious of such tokens, which aim to be pegged to current assets such as the dollar. Digital tokens like bitcoin were considered to pose a threat to government-backed currencies like the euro.
MiCA represents the EU’s first attempt to create a comprehensive regulatory framework for digital assets. Despite the fact that some of its more stringent measures have unnerved a few crypto companies, a few industry insiders view the move as a positive development and believe Europe may be a leader in crypto regulation.
The rules are anticipated to go into effect as early as 2024, a momentous move that would place the bloc ahead of both the United States and the United Kingdom in terms of implementing crypto-specific laws.
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