Lyra Martin Tech 07.01.2022 08:Jul AM EDT

EU Announces New Crypto Law, MiCA, Targets Fraud and Climate Change Effects

OVERVIEW

MiCA will give bitcoin asset issuers legal security, encourage fair competition for service providers, and safeguard consumers.
Under the new law, significant CASPs must publicize their energy use to reduce the carbon impact of cryptocurrencies, especially transaction confirmation procedures.

MiCA Prevents Fraud, Criminality, Climate Change

According to the European Parliament, new crypto legislation that seeks to safeguard consumers and service providers has been tentatively approved by Europe and its member states. It's called 'MiCA' (markets in crypto-assets), and it's made to protect against fraud, crime, climate change, and other things.

According to a statement from German MEP Stefan Berger, MiCA will be a significant standard-setter in the Wild West of the crypto-world. MiCA will provide a unified market, give cryptocurrency asset issuers legal security, promote fair competition for service providers, and uphold high standards for consumer protection.

By regulating public crypto offers, a new regulatory framework aims to safeguard market integration. A crucial feature is a public register maintained by the European Securities and Markets Authority (ESMA) to address concerns about money laundering. Major crypto-asset service providers (CASPs) will also be required to provide information to their national regulator, telling ESMA about their energy use and environmental and climatic impact data.

The legislation covers Bitcoin and ether, but non-fungible tokens (NFTs), such as cinema tickets, digital souvenirs from apparel companies, or in-game goods in video games, are not. These could subsequently be classed in accordance with the regulations as financial instruments or cryptocurrency assets covered by the MiCA.

The bill is still in its early stages, and crucial issues, including whether CASPs must have EU bases of operations, are still being debated, according to Bloomberg. A clause banning bitcoin and other cryptocurrencies that employed energy-intensive mining techniques was part of an earlier proposal initially put up in 2020. After protests from the industry, they were subsequently taken off.

The announcement comes after a difficult period for cryptocurrencies that saw the collapse of TerraUSD and other tokens, a suspension of withdrawals from Celsius, and a general decline in the market. Although the US has not yet adopted its own crypto regulations, senators from both parties recently sponsored a measure that would.

EU's New Climate and Fraud Protection Rule: What Should We Know?

Negotiators from the Economic and Monetary Affairs Committee and the Council reached a tentative political agreement on new crypto-asset regulations on Thursday (June 30) night (MiCA).

Transparency, disclosure, authorization, and supervision of transactions are critical conditions that negotiators accept for creating and dealing with crypto-assets (including asset-reference tokens and e-money tokens). Consumers would better understand risks, prices, and charges.

Additionally, the new regulatory framework will promote market integrity and financial stability by controlling public offers of crypto assets. The agreed-upon article also contains steps to combat market manipulation, stop money laundering, stop terrorist funding, and stop other illegal actions.

Moreover, under the new rule, significant CASPs will have to publish their energy use to lower the enormous carbon footprint of cryptocurrencies, notably of the procedures needed to confirm transactions. To provide the market with a clear direction on how such disclosures should be carried out, ESMA should develop technical and regulatory standards addressing these duties.

CASPs should also make information on their environmental and climatic effect readily accessible to the public in a visible location on their website and provide this information to their competent national authority, who will tell ESMA.

The EP negotiating team's interim political accord must now be ratified by the Economic and Monetary Affairs Committee and the plenary before the contract takes effect.