Beware of EU crypto regulations | PYMNTS.com

How do you tackle a problem like crypto?

As US regulators and lawmakers wrangle over how to oversee the notoriously tumultuous digital asset industry, the European Union on Thursday (April 20) became one of the first jurisdictions in the world to actually introduce a comprehensive set of rules surrounding cryptoassets and their use.

EU lawmakers voted 517-38 in favor of a crypto-licensing framework, Markets in Crypto-Assets (MiCA), setting the stage for introducing tailor-made regulations for the crypto industry, centered around protecting users and supporting innovation, to one of the world’s largest and most mature market economies.

EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, Mairead McGuinness, called it a “world first” in a chirping.

The texts must now be formally approved by the Council before publication in the EU’s official journal. They will take effect 20 days later and take effect over the next two years, according to a release announcing that MiCA had passed its final parliamentary vote.

“This puts the EU at the forefront of the token economy,” said Stefan Berger, lead MEP for the MiCA regulation. “Consumers will be protected from deception and fraud and the sector damaged by the FTX collapse can regain confidence.

“This regulation gives the EU a competitive advantage. The European crypto-asset industry has regulatory clarity that doesn’t exist in countries like the US,” he added.

MiCA’s unified regulatory framework for the 27-nation bloc is likely to make the group of European nations more attractive to digital asset companies, as well as putting pressure on other jurisdictions to establish their own equivalent safeguards.

read more: SEC Chairman Gensler Defends Crypto Crash in Controversial House Hearings

A tale of two futures

The US has so far taken the approach of controlling the crypto sector through a series of enforcement actions, which many industry players have judged to be opaque and helpful.

As reported by PYMTS, the Securities and Exchange Commission (SEC) has to date gone after several leading players in the industry, including Terra, Coinbase, Kraken, Paxos and Binance, saying that the crypto companies either offered customers products that were actually illegal securities offerings. , or violated investor protection laws.

“The SEC’s Approach to the Crypto Economy [is] confusing, unclear, opaque and ultimately blind to the damage its regulation by enforcement strategy is doing to legitimate companies in this country,” Kristin Smith, CEO of the Blockchain Association, so.

During a congressional hearing on Tuesday (April 18), SEC Chairman Gary Gensler said his agency has “a clear set of rules built up over 90 years… [crypto firms] have no choice. They are generally non-compliant and must be followed.”

Making Europe fit for the digital age

“Parliament and Council have found a fair compromise that will make it safer for people of good will to hold and trade crypto-assets. However, it will make it more difficult for criminals, terrorists and sanctions evaders to misuse crypto assets. Any administrative burden on crypto companies and innovators will be more than offset by the fact that we are unifying the currently fragmented European market that has 27 regulatory regimes,” said Co-Mayor of the Civil Liberties, Justice and Home Affairs Committee Assita Kanko.

The EU’s MiCA framework will require any company providing crypto-related services to apply for regulatory approval in one of the bloc’s member states. If approved, that business will be allowed to operate across the entire EU market.

MiCA’s text says one of the legal framework’s “priority areas” is to ensure that the EU’s financial services regulatory framework is “innovation-friendly and does not pose obstacles to the application of new technologies,” adding that the aim is to make Europe fit for the digital age and to build a “future-ready economy that works.”

The European Banking Authority and the European Securities and Markets Authority (ESMA) will be responsible for ensuring that crypto platforms comply with the rules, including having adequate risk management and governance processes.

In a tweet ESMA says called the legislation a “significant step towards ensuring robust protection for investors in the cryptoasset market,” while continuing to emphasize that “investing in cryptoassets is a risky endeavor with limited safeguards at this stage.”

The European Parliament also voted 529-29 to pass a separate law targeting the crypto sector. Known as the Regulation of Funds Transfer, the new bill would require crypto operators to identify their customers in an effort to stop money laundering, tracking crypto-based operations in the same way as traditional money transfers, which some industry observers have dismissed as effectively removing the anonymity of blockchain-based transactions was founded on.