The EU agrees to tame “Wild West” with new crypto market rules

Souvenir tokens representing the cryptocurrency Bitcoin and the Ethereum network, with their original token ether, plunge into this illustration taken on May 17, 2022. REUTERS / Dado Ruvic / Illustration

LONDON, July 1 (Reuters – Cryptocurrency companies will need a license and customer protection to issue and sell digital tokens in the EU under groundbreaking new rules agreed by the bloc to tame a volatile “Wild West” market.

Globally, cryptocurrencies are largely unregulated, with national operators in the EU only required to show controls to combat money laundering.

Representatives of the European Parliament and EU states struck out an agreement late on Thursday on the law on Markets in Crypto-assets (MiCA).

“Today we are putting order in the wild west of cryptocurrencies and setting clear rules for a harmonized market,” said Stefan Berger, a German center-right legislator who led negotiations.

“The recent decline in the value of digital currencies shows us how risky and speculative they are, and that it is fundamental to trade,” Berger said.

The crypto markets have fallen this year as investors worried about rising interest rates, which led to the collapse of terraUSD stablecoin and the freezing of withdrawals and transfers by major crypto companies Celsius Network and Voyager Digital. read more

Bitcoin, the largest token, has fallen around 70% since the record $ 69,000 in November, dragging down the overall market.

CONSUMER PROTECTION

The Landmark Regulation confirms the EU’s role as a standard setter for digital issues, EU states said.

“Crypto-asset service providers will have to respect strong requirements to protect consumers ‘wallets and be held accountable in the event that they lose investors’ crypto-assets,” they added.

The new law will require formal rubber stamping by the European Parliament and EU states to become law, followed by an implementation period. read more

It gives cryptocurrencies and related service providers a “pass” to serve customers across the EU from a single base.

Holders of stablecoins – a cryptotype designed to maintain a stable value – will be offered a claim at any time and free of charge by the issuer, with all stablecoins monitored by the block’s bank guard dog.

Robert Kopitsch, general secretary of the blockchain group Blockchain for Europe, which includes the major exchanges Binance and Crypto.com, said the rules were “a mixed bag” and added that the group feared “that stack coins would have no way of being profitable in the first place.” “

However, Coinbase Global Inc, a major global cryptocurrency exchange, said in a blog post on Friday that the comprehensive new framework was “exciting”, provides regulatory security to the market and raises industry standards.

“A harmonized simple set of EU-wide rules will enable us to invest, accelerate and scale our growth efforts across the block.”

AFME, a body in the financial markets, said that the rules will reduce fragmentation and support the development of a robust and well-functioning market.

However, more clarity is needed to ensure that crypto asset managers are only on the hook in cases of negligence or misconduct, and not for incidents beyond their control, such as a nation state hack, AFME said.

NFT-KOMPROMIS

Many states have long opposed the inclusion of non-fungible tokens (NFTs), digital assets that represent objects from art to videos.

But under pressure from EU lawmakers, Thursday’s compromise predicts that NFTs will be excluded “unless they fall into existing categories of cryptocurrencies”.

Within 18 months, Brussels will assess whether independent rules are necessary for NFTs.

National regulators will be responsible for licensing crypto firms, but they must keep the EU Securities and Exchange Commission ESMA informed of major operators.

ESMA will develop standards for crypto companies to disclose information about their environmental and climate footprint.

The United States and the United Kingdom, two major crypto centers, have not yet approved similar rules. read more

Circle, the company behind the big USD Coin stack coin, called the rules “a significant milestone.”

“Although no comprehensive set of rules is perfect … it still provides practical solutions to problems that other jurisdictions are just beginning to struggle with,” it wrote in a blog post.

Further reporting by Francesco Guarascio in Brussels and John O’Donnell in Frankfurt Editing by Mark Potter, Jonathan Oatis, Gareth Jones, Paul Simao and David Gregorio

Our standards: Thomson Reuters Trust Principles.