In addition to wanting to better regulate internet players, via the DSA and DMA projects, the European Union is also turning to the cryptocurrency market. At a time when the sector is experiencing a major crisis, the MiCA or European regulation on crypto-assets continues to advance.
Presented by the European Commission in September 2020, the MiCA has just taken an important step towards its adoption. Indeed, as announced in a press release this week, the Council Presidency and the European Parliament reached a provisional agreement on the proposal.
In its current form, the proposal covers crypto, stablecoins, and cryptocurrency exchanges and wallets. The text aims to protect investors as well as financial stability, while supporting innovation in the field of cryptos, according to the statement from the Council of the EU.
In addition, a European text will allow for harmonization within the EU, while States already have their own regulations in terms of crypto-assets.
“This constantly evolving sector has demonstrated the urgent need for EU-wide regulation. MiCA will better protect Europeans who have invested in these assets and prevent their misuse, while supporting innovation and the attractiveness of the EU. This landmark regulation confirms the role of the EU in setting standards for digital sectors”said Bruno Le Maire, French Minister of Economy, Finance and Industrial and Digital Sovereignty
Investor protection, environment, and safeguards for stablecoins
In terms of crypto, the MiCA wants to put in place enhanced protection for investors. Thus, the current proposal obliges companies to “respect strong requirements for the protection of investors in crypto-assets”. And in case of losses, these will be considered responsible.
The EU also wants to oblige companies in the sector to provide information on the environmental impact of their activities. The fight against money laundering will be covered by another text, but the MiCA will nevertheless specify that the European Banking Authority will have to list non-compliant players.
Specific provisions are also provided for crypto service providers whose parent company is located in a country considered to be at high risk for money laundering.
Regarding stablecoins, the EU is using recent events to demand certain guarantees from issuers.
“MiCA will protect consumers by requiring stablecoin issuers to build up a sufficiently liquid reserve, with a ratio of 1:1 and partly in the form of deposits. Each holder of so-called “stablecoins” will be able to be reimbursed at any time and free of charge by the issuer, and the rules governing the operation of the reserves will also provide for an adequate minimum liquidity. In addition, all stablecoins will be supervised by the European Banking Authority (EBA), with the presence of the issuer in the EU being a prerequisite for any issuance”explains the European Council.
“The development of asset pool stablecoins (ARTs) based on a non-European currency, used as a means of payment, will be limited to preserve our monetary sovereignty. In order to ensure proper oversight and monitoring of public offerings of ARTs, issuers of this type of token will need to be headquartered within the EU.”adds this one.
And on the administrative level, the agreement provides that all providers in the field of cryptos will have to have an authorization to provide their services in the EU.
Otherwise, it should be noted that in its current form, the MiCA does not cover NFTs. Nevertheless, it is expected that the European Commission will assess the sector and determine if a specific regime is necessary for this category of digital assets.
It should also be noted that if the provisional agreement is already an important step taken, the text will still have a long way to go. The next step will be the submission of this agreement for the approval of the Council and the Parliament, which will be followed by the adoption procedure.