MiCA has finally been translated (and approved!) by the EU
The Ordinance on Markets for Crypto Assets (MiCA) was formally ratified and adopted by the EU on 20 April 2023. The full text of MiCA was approved by the European Commission in October, but required several months of translation before it was formally approved by the European Parliament by an overwhelming vote of 517-38. yesterday.
In passing MiCA, the EU has become the first major jurisdiction to adopt a comprehensive regulatory framework for cryptoassets. The main provisions are expected to enter into force in mid to late 2024 after publication in the EU Official Journal. MiCA will apply directly throughout the EU without the need for national implementing laws.
The MiCA establishes requirements for a number of providers and issuers of cryptoasset services, in relation to initial public offerings, stablecoin issuers, licensing of cryptoasset service providers and market conduct. The regulation covers a wide range of asset-referenced tokens, electronic money chips and utility tokens. However, it does not include certain non-fungible tokens, security tokens and DeFi.
MiCA was developed as part of a broader regulatory effort, involving initiatives including the Digital Operational Resilience Act, the DLT Pilot Regime and the Transfer of Funds Regulation which includes broader reforms in relation to AML/CTF and was also passed in a 529-29 vote in goes.
The European Commission’s Mairead McGuinness described the vote as a “world first” for crypto regulations.
We protect consumers and safeguard financial stability and market integrity
Lawmaker Stefan Berger, who led the negotiations on the law, said in a press release:
This puts the EU at the forefront of the token economy… This regulation gives the EU a competitive advantage. The European crypto-asset industry has regulatory clarity that does not exist in countries like the US.
Although it will still be some time before MiCA comes into effect, European businesses can now start preparing for a post-MiCA future with a clearer understanding of the regulations that will apply to crypto asset service providers in Europe. This is likely to create a competitive advantage for Europe in attracting digital asset companies. While Europe has won the race to adopt formal rules for cryptoassets, there is still room for other jurisdictions to catch up, given the significant time period before formal implementation.
Mastercard launches Music Pass NFTs
Mastercard has announced the launch of their limited edition Music Pass non-fungible tokens (NFT) as part of the Artist Accelerator program. Developed in collaboration with Layer 2 scaling protocol Polygon, the NFT project will support emerging Web3 musicians and artists to grow their careers. The company announced additional details about the program in a press release, explains:
Mastercard Artist Accelerator Program [is a] Web3 platform that provides [the NFT holders] free access to educational materials, unique AI tools through our collaborations and invaluable experiences to increase creativity for music artists.
This marks the second NFT collaboration project offered by Mastercard since 2022, when it teamed up with Moonpay, Nifty Gateway, The Sandbox and Immutable X among others to create NFTs for their cardholders. Mastercard has also previously provided payment solutions to enable Coinbase users to purchase NFTs via Mastercard cards, achieving status as one of the most active financial services companies involved in Web3.
Mastercard’s head of marketing and communications confirmed the company’s vision in blockchain and digital assets:
As a company, we hope to help people and partners around the world better understand and trust how blockchain and digital assets are used – and how our technology can support the ecosystem. We also believe that Web3 can be a powerful tool for connecting people and building communities around shared universal passions.
Mastercard has previously demonstrated its support for the music industry through sponsorship with the Grammy Awards and Brit Awards, but this initiative is the company’s first attempt to combine music with NFTs. Following Nike’s first NFT release on its .SWOOSH NFT platform, Mastercard’s announcement indicates that interest in Web3 remains strong among large institutions looking to engage customers in new and unique ways. The limited edition Mastercard Music Pass NFT can be collected until the end of April.
Swish for .SWOOSH as Nike drop digital sneaker NFT collection
Nike is set to launch a new line of digital sneakers exclusively on .SWOOSH, marking a significant move into the virtual footwear space. The newly launched .SWOOSH platform will host collectable non-fungible tokens (NFTs) and allows users to trade NFTs, create their own collections and earn royalties.
The Our Force 1 (OF1) NFT sneaker features the iconic Air Force 1 design. Nike will send “posters” to select .SWOOSH users giving them early access to the May 8 sale before the collection opens to the public on May 10.
Users can purchase either the “Classic Remix” or the “New Wave” box, each corresponding to different designs. Commemorating the year the first Air Force 1 sneaker was released, each box will be priced at $19.82.
Each “box” will contain an NFT with a 3D paired file that can be swapped and used or worn in video games and other immersive experiences. Nike has said that the broader utility of .SWOOSH could extend to allowing users to create their own collections, earn royalties and access physical products and experiences.
In a press release, General Manager of Nike Virtual Studios Ron Faris commented on the new era for Nike products:
The OF1 collection shows how Nike will continue to innovate at the intersection of play and culture for the sport of the future… SWOOSH is the marketplace of the future
The .SWOOSH platform is still in a closed beta for testing and trials, although potential users can sign up for membership online. The NFT collection is expected to debut on the Polygon layer 2 blockchain, which is an Ethereum scaling solution. Unfortunately for virtual sneaker freaks, .SWOOSH is not currently supported in Australia.
AML/CTF regime set for a shake up
The Australian Government has announced a consultation to reform Australia’s anti-money laundering and anti-terrorist financing (AML/CTF) regime after the Senate’s report published in March onAdequacy and effectiveness of Australia’s anti-money laundering and counter-terrorist financing (AML/CTF) regime‘ (the Report).
In a press release, Australia’s Attorney-General, Hon Mark Dreyfus stated that the AML/CTF regime needs to be updated to respond to the changing threat environment and evolving international standards.
Significant regulatory gaps and vulnerabilities have made Australia an increasingly attractive destination for money laundering.
According to an overview published by the Attorney General’s Department, the proposed reforms will consist of two parts:
- Reforms that will simplify and modernize the operation of the existing regime.
- Reforms to extend the AML/CTF regime to high-risk professions, including lawyers, accountants, trust and company search providers and other so-called tranche-two entities.
The consultation document also considers potential reforms in relation to the cryptocurrency industry based on the Financial Action Task Force (FATF) guidance.
Crypto-assets such as digital currencies have become established as part of the global financial landscape. The AML/CTF regime must be reformed to respond to the risks in this established sector.
According to the paper, the proposed reforms could extend the AML/CTF regulation of digital currencies to cover the following services in line with FATF recommendations:
- exchange between one or more other forms of digital currency;
- transfers of digital currency on behalf of a customer
- custody or administration of digital currency, and
- provision of financial services related to an issuer’s offering and/or sale of a digital currency (eg Initial Coin Offerings where start-up companies sell investors a new digital token or cryptocurrency to raise money for projects).
Interestingly, DeFi platforms do not appear to be in room for reform at this stage, noting that this has been a topic of considerable discussion in other jurisdictions following new guidance issued by the FATF in 2021.
The consultation note asks two broad questions for consideration in relation to cryptocurrencies:
- What are the benefits and challenges of extending AML/CTF obligations to a wider range of digital currency-related services?
- How can definitions under the Act be amended to integrate digital currency activity into payment-related obligations, such as activities related to credit, debit and stored value cards and general transfers?
The article expressly notes that the proposed reforms in relation to the AML/CTF regulation of digital currencies are intended to be aligned with any reforms in relation to the crypto-asset services sector by the Ministry of Finance to minimize duplication.
According to the Attorney General’s press release, Australia is a founding member of the FATF, but has failed to comply with 16 out of 40 FATF standards. In addition, the Australian Institute of Criminology estimates that serious and organized crime cost Australian society up to AUD 60 billion in 2020-21. The Government’s proposed reform package is partly a response to these issues and an expected FATF review 5th Mutual Evaluation of Australia’s AML/CTF regime which could see Australia placed on the FATF greylist.
This hearing is the first step in a two-part hearing process and will end on 16 June 2023. You can submit a submission on the Attorney General’s website here. The second consultation is expected to take into account feedback from the industry and will presumably contain more concrete proposals for reform.
The AML/CTF changes proposed in the consultation paper have been long overdue and will bring Australia in line with reforms already implemented or in the process of being implemented in other jurisdictions such as the UK and the EU. Experience from other jurisdictions suggests that all legislative proposals in relation to digital currencies need to be carefully scrutinized to ensure they are fit for purpose while seeking to leverage the transparency benefits offered by blockchain technology to address AML/CTF risks.
