The European Parliament has finally done it. A landmark “Markets in Crypto-Assets (MiCA)” bill to regulate crypto-assets was passed on April 20 after years of debate and at least two postponements. The European Parliament also passed the “Transfer of Funds” regulation, which imposes stronger surveillance and identity verification requirements on cryptocurrency operators.
The world’s first groundbreaking bill
European Commissioner Mairead McGuiness described the regulations as “a world first”. The Green Party’s Ernest Urtasun called it “the end of the crypto pioneer era.”
This bill will be implemented at the national level. Although we have to wait for official approval by the European Council, we are almost ready to go into effect next year. The board already confirmed the text of the bill last year, so the approval is a formality.
Many see MiCA as an important step forward for the cryptocurrency industry. It is the first large-scale initiative to provide comprehensive rules for crypto-related companies, and what is allowed and not allowed when doing business in the 27-member EU. It becomes clear who is responsible.
The EU hopes that MiCA will establish international standards. This also raises concerns about the effectiveness of MiCA if similar rules are not adopted in other parts of the world.
MiCA requires cryptocurrency companies such as wallet companies and exchanges to obtain licenses from the EU when conducting business with customers residing in the EU, and to conduct money laundering and terrorist financing. Obligation to follow rules to prevent Some have criticized the reporting obligation, which clearly sacrifices the privacy of cryptocurrency users in the name of customer safety and national security.
But given the industry’s growth has been hampered by regulatory uncertainty over the past decade, MiCA should welcome some degree of transparency and stability.
Changpeng Zhao, CEO of cryptocurrency exchange Binance, endorsed MiCA, calling it a “practical solution.” He said Binance will also comply with MiCA.
Movements in China and America
The EU’s stance on crypto as seen in MiCA contrasts with the other two big crypto markets, the US and China.
China has formally banned all cryptocurrency activity, at least nominally, but there have been signs of a softening of that stance recently (at least in Hong Kong). China has not completely eradicated cryptocurrency trading and mining, and the legalization of some businesses is good news for those contemplating a return to China.
In the US, lawmakers, regulators, bureaucrats, even the US Federal Reserve (Fed) and the Biden administration appear to be working together to keep cryptocurrencies out of the US economy. Apparently, this is part of what has been called a “whole government approach” to tackling crypto, announced in an executive order earlier in 2022, before the worst of the crypto industry was exposed. .
Efforts to legalize and regulate cryptoassets remain, but SEC Chairman Gensler and others oppose new rules.
According to Gensler, existing financial rules are likely sufficient to cover the new and unique attributes of decentralized technology. The entire crypto industry has been impoverished by a political struggle between those who want to give time to the cryptocurrency to come into its own, and those who want to target and destroy the industry.
Uncertainty of regulations may lead to an escape from the United States?
For example, Ethereum (ETH) is currently in a “Schrödinger’s Cat” state. ETH is both legal and illegal because SEC Chairman Gensler said it may or may not meet the requirements of the “Howey test” used to determine whether it is a security. .
That regulatory uncertainty has led Brian Armstrong, CEO of the largest US cryptocurrency exchange Coinbase, to talk about the possibility of a move from the US.
It may be a lip service given that Coinbase’s business revolves around fees from US customers, but others have made similar statements.
Related article: Coinbase could move out of the US without regulatory clarity: Armstrong CEO
Certainly Gensler is only calling for common-sense regulation of the increasingly powerful financial infrastructure. The chairman’s request that exchanges register with the SEC and strengthen their customer identification systems is not much different from the new EU regulations.
There is, of course, a difference between the EU and the US in that one has actually taken a “whole government” approach to crypto, while the other has only said it will.
｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Juliana Kozoski/Unsplash (edited by CoinDesk)
｜Original: Why the EU Has MiCA and the US Has Securities Law Confusion