Official approval of MiCA
On the 1st, the European Union (EU) signed and formally approved a comprehensive regulation proposal “MiCA” on crypto assets (virtual currencies). Among them, the provisions on stablecoins are scheduled to come into effect in July 2024.
Facilitated trade for Ukrainian products, and stronger rules to prevent financial crime through crypto-assets – this will
be the effect of two of the new EU laws negotiated under #EU2023SE.
— Swedish Presidency of the Council of the EU (@sweden2023eu) May 31, 2023
It was signed by the President of the European Parliament, Roberta Mezzola, and the Swedish Minister for Rural Affairs, Peter Krugren.
Entry into force 20 days after publication in the Official Journal of the EU. Stablecoin regulations will go into effect in July 2024, while most other regulations, such as the Travel Rule, will not come into effect until January 2025.
The phased implementation is intended to give markets sufficient time to adapt to the new regulatory framework. In the future, each European regulatory authority will proceed with the creation and application of new regulations based on MiCA.
What are Travel Rules?
Travel rules are rules on international wire transfers to prevent money laundering, etc. advocated by FATF (Financial Action Task Force).
According to MiCA, stablecoin issuers must hold sufficient cash to back customer funds. Appropriate disclosure is also required to disclose risks, price stabilization mechanisms, asset custody methods, etc.
Other stipulations include ensuring the liquidity and reliability of assets, conducting regular audits and stress tests, and guaranteeing the redemption rights of token holders.
It also stipulates that stablecoin issuers and cryptocurrency service providers must not grant interest to stablecoin holders.
Since this provision is described in the section on stablecoin issuers, it has been pointed out that the main purpose is to prevent stablecoin issuers from behaving like banks. .
In this regard, Diego Baron Osio of Clifford Chance Law Firm opines that lending in DeFi (decentralized finance) can be considered a secondary service that is performed separately from the stablecoin issuer. bottom.
If it is considered a secondary service, it could be exempt from the rule that no interest should be accrued, but it would depend on the specific circumstances, he added.
What is a stablecoin
A cryptocurrency whose price is always stable. Stablecoins are a type of cryptocurrency, and unlike volatile assets such as BTC, ETH, and XRP, the purpose is to maintain its value ($1) backed by the US dollar. In addition to US dollar-backed stablecoins (USDT/USDC), there are also stablecoins that use algorithms.
ECB Governor Proposes Scope Widening
MiCA stands for “Market in Crypto Assets” and is a comprehensive cryptocurrency regulation proposal announced by the EU in September 2020. In addition to stablecoins, it also defines licensing and consumer protection requirements.
Cryptocurrency-related companies will also be required to disclose their impact on the environment, such as energy consumption.
At the same time as MiCA, Europe has also approved anti-money laundering legislation that requires cryptocurrency service providers to verify the identity of their customers when transferring funds.
The current MiCA does not clearly target staking, lending, DeFi regulations, etc., but European Central Bank President Christine Lagarde said in November last year that MiCA would need to be expanded to these areas in the future. proposes that there is
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