EU adopts crypto law with prescribed whitepapers, free airdrops and NFTs – Trustnodes
The European Union has become the first in the world to pass comprehensive crypto legislation, bringing much-needed clarity to the sector.
Exemptions for airdrops and native tokens for blockchain, e-money regulations for stablecoins and prescribed whitepapers are some of the key features of the new Markets in Crypto-assets (MiCA) law.
“To ensure a proportionate approach, no requirements of this Regulation should apply to offerings of cryptoassets, other than asset-referenced tokens or e-money tokens, which are offered for free or which are automatically created as a reward for maintaining DLT or validating transactions in the context of a consensus mechanism, the law says, adding:
“When a public offering of crypto-assets, other than asset-referenced tokens or e-money tokens, is made in the Union or when seeking the admission of crypto-assets to trading on a trading platform for such crypto-assets, offerors or persons seeking Admission to trading should produce, notify their competent authority and publish an information document (“a white paper on cryptoassets”) containing mandatory information.
Such white paper on crypto-assets should contain general information about the issuer, the offeror or the person seeking admission to trading, about the project to be carried out with the obtained capital, about the public offering of crypto-assets or about their admission to trading on a trading platform for crypto-assets, about the rights and the liabilities associated with the crypto-assets, about the underlying technology used for such assets and about related risks.”
For stablecoins, “the function of such crypto-assets is very similar to the function of electronic money, as defined in Article 2, No. 2, of Directive 2009/110/EC of the European Parliament and of the Council.” So they define it as e-money and apply that directive.
NFTs are exempt from this law, so art can continue to flourish in Europe, and the UK is likely to adopt the same approach.
Out with the SEC, in with Europe
The passage of this law comes as the crypto industry is engaged in fierce battles with the US Securities and Exchanges Commission (SEC), which are fought out in a series of courts and committees.
Unlike the opinion-based approach of whoever happens to be the current director of the SEC, the EU applies the rule of law and follows due process.
In a reasonable way from what we can see, although we should admit that we have not yet read the full 376 pages of the attached document.
Still on the surface, the law strikes a warm tone, saying “by streamlining capital-raising processes and increasing competition, crypto-asset offerings can allow an innovative and inclusive way of financing, including for small and medium-sized enterprises (SMEs).”
It says the framework “should enable crypto-active service providers to scale up their business on a cross-border basis and should facilitate their access to banking services to run their activities smoothly.”
In addition, this applies to the entire EU, a market of around 14 trillion dollars. Other EU neighbours, such as Norway, Switzerland or the UK, will follow a similar approach, making it a market of around 20 trillion dollars in total that mostly finds the right balance.
The airdrop exemption is quite large as it provides certainty to define that these airdropped tokens are not securities and they do not even need to publish a prescribed whitepaper because such tokens are usually airdropped when there is an already running platform which tends to be open. source code, which makes it much better than a white paper.
This law facilitates capital formation in innovative crypto frontiers by not requiring registration with the new and upcoming SEC equivalent called the European Securities and Markets Authority (ESMA).
Instead, such entrepreneurs only need to publish a prescribed whitepaper, which they used to do anyway, but now the law is a potential hammer that the whitepaper must be accurate.
The exemption for NFTs brings security to the whole new area and even in the case of stablecoins, no bUSD will be shut down here as they can only follow the directive, just like a euro stablecoin startup does.
The rest is then what you would expect in terms of exchanges that need to be robust so that their CEO doesn’t just take or “borrow” clients’ funds, and if the capital formation is by a centralized entity or in a centralized way then it’s a security just like with actual securities.
In the US, however, because of the complete uncertainty and because Gary Gensler is clearly a buttcoiner, everything is a security, even the cat pictures.
But entrepreneurs in this area don’t have to worry about the US anymore. It’s a huge global market that has the weight to set global standards, as shown by the cookie banners that are now everywhere, and within that there are around 27 member states with their own tax rules, like no capital gains if you stay in Germany for a year.
You can pick any of them, and just like that, the SEC becomes the “we won’t innovate for you” nightmare that it was and no longer is.
Instead ESMA. This MiCA legislation is a very big step also for Europe because funding is finally done at European level.
They have tried and are still trying to achieve a banking union, a capital union, but things are still very slow, even in equities.
As an example, it is difficult to get public disclosure of European stock trading companies without going through the typically 90s user interface of member country SECs, which is very inefficient and quite a barrier even for someone like us who deals with information.
Sooner or later ESMA will take over that aspect because it is necessary if the EU capital markets are to be completed, but as far as the crypto industry is concerned, we don’t have to wait any longer as we get to be the first to experience the capital union in crypto aspects.
It’s a subtle step for Europe, but a pretty big one at its current station, and in terms of VCs, entrepreneurs and much more, Europe is now there to be for global crypto.
