After 2 years of debate, Europe finalizes landmark encryption rules

EU officials have agreed on the final wording for their landmark crypto legislation that could pave the way for a European regulatory approach.

The full text of the Markets in Crypto Assets Regulation (MiCA) was approved at a meeting of EU ambassadors on Wednesday, according to a letter from committee leader Edita Hrdá.

In the letter to the European Parliament’s head of the committee on economic and monetary affairs Irene Tingali, Hrdá said that the cooperation between the parliament and the council should make it possible to approve the regulation at the first reading in the parliament.

In June, the politicians agreed on an agreement on the legislative package after two years of back and forth.

The regulation, in its current form, would require anyone wishing to issue crypto to publish a “crypto-asset white paper” containing information about their project.

Issuers of stablecoins, meanwhile, will be subject to specific capital requirements.

This means that projects must hold reserves to back up the value of their tokens in an amount proportional to how much is issued, although local governments can increase the amount required based on how risky it is deemed to be.

The text of the law will now go to the European Parliament, where, subject to approval, it is likely to be published in the Official Journal of the European Union early next year, with the rules set to come into force in 2024.

“Important topics” are left out, industry says

Crypto advocates welcomed the news but said the legislation had yet to address several key points, including non-fungible tokens (NFTs) and the future of decentralized finance (DeFi).

“This marks the end of a heated but necessary discussion between EU co-legislators, which has been ongoing for more than two years,” the Brussels-based European Crypto Initiative (EUCI) said in a statement.

The group suggested that a heavy focus on stablecoins in the legislation resulted from its origins as a response to Facebook’s Diem (formerly called Libra) project and that lawmakers had taken a “very defensive” approach.

EUCI added that NFTs are excluded from MiCA’s scope, creating uncertainty if regulators across EU member states apply different interpretations of the assets.

DeFi projects will also not be affected by the regulation, but the EUCI said these were not properly defined in the final text.

Despite these criticisms, EUCI co-founder Marina Markezic said she was optimistic about the impact MiCA will have on the industry.

“It creates a whole new set of rules for crypto projects—those who want to change crypto’s current position as an “underdog” and make it a full participant in the financial sector, she said. “At the same time, we also believe that industry should still be able to innovate without undue burdens.”

EU to discuss crypto rules with US

It comes as Mairead McGuinness, the EU commissioner in charge of financial services, said crypto regulation will be at the top of the agenda in discussions with US officials next week.

Speaking on a Bloomberg eventShe said the EU is looking to exchange views and experiences with the US at the International Monetary Fund and World Bank annual meetings next week.

“I’m sure they want to hear what we’ve done, how it went, what the problems were,” she said. “I would very much like to share our experience, but also to hear what the United States plans to do.”

McGuinness earlier this year called for a global crypto agreement a piece for American political website The ground.

“I believe that the EU and the US together can lead the way on a common international approach to crypto regulation,” she wrote at the time.