Revolutionary Move: European Parliament Approves Comprehensive Regulations for Cryptocurrency Industry
In order to regulate the cryptocurrency industry with a human-centric approach, the members of the European Parliament have approved the world’s first comprehensive package of regulations. On Thursday, the Parliament voted 517 in favor and 38 against the Crypto Act, or the MICA, which aims to mitigate the risks faced by consumers who purchase crypto assets, making providers liable if investors lose their crypto assets.
On Thursday, the US Congress released a statement outlining various requirements that will be implemented through regulations for the supervision of crypto platforms, token issuers, and transactions. Additionally, transparency, disclosure, and accountability will also be enforced. Token issuers will also be required to regulate the sale of new tokens.
Platforms will need to notify users about the risks associated with their operations. Stablecoins such as Tether and Circle should also be held in sufficient reserves so that redemption requests can be fulfilled in the event of a run on the bank. These stablecoins can reach as high as $220 million in daily transactions.
Under the “European Asset and Market Authority” or ESMA, crypto platforms could be banned or restricted if they fail to provide proper security to investors or pose a threat to market integrity and financial stability. The regulations, known as MiCA, also take into account environmental concerns and force companies to disclose the impact of their digital assets on the environment, along with their energy consumption.
The European Commissioner for Financial Services, Mairead McGuinness, expressed her support for the regulations and hopes they will come into effect next year.
Talking about cryptocurrency transfers, Changpeng Zhao, the CEO of Binance, said in a tweet that his company is ready to comply fully for the next 12-18 months and is prepared to integrate its business to stay in compliance. There is controversy surrounding this issue as it is a major privacy concern for cryptocurrency enthusiasts, and disclosure of transfer information may be necessary. Binance is being closely examined by regulators to ensure that they integrate their business to comply. In March, the Commodity Futures Trading Commission filed a lawsuit against Binance, Zhao, and their former compliance officer, Samuel Lim, alleging that the company actively solicited American users without permission.
The SEC has offered solutions to all the challenges facing the cryptocurrency market. Regulatory bodies have called for measures to be put in place to curb the negative impact of the crypto market due to several alarming failures in the industry. One such project, TeraUSD, was caught up in a $60 billion investment debacle where investors lost faith in the project. This led to a chain reaction in the industry, involving other companies such as Three Arrow Capital, BlockFi, and Voyager Digital. In November, FTSE, which was once the fourth largest crypto exchange, filed for bankruptcy, marking one of the highest-profile crypto failures in the industry.
This step puts the European Union ahead of the US and UK. Before this, there were no official regulations for the crypto space. On Monday, an official from the UK stated that specific crypto regulations could be implemented within a year.
After the laws of the European Union are enforced, crypto companies will be able to use their licenses in a European country to provide their services in different member states. Crypto companies are now planning to obtain licenses from European authorities and open new offices in the hope of being affected by the law.
Recently, the crypto exchange Coinbees and the virtual asset service provider Kraken have been licensed in Dublin. The blockchain firm Ripple is seeking a license from the Irish Central Bank.
US crypto companies are considering expanding overseas in response to tough regulatory measures on the domestic front. The Securities and Exchange Commission (SEC) had issued CoinBase a Wells notice, which was one of the final stages before issuing a fine by regulators last month. On Thursday, Brian Armstrong, the CEO of CoinBase, told CNBC at a fintech event that the company is prepared for a “years-long” legal battle with the SEC. In a separate interview on stage, he said there is “an ability for there to be a significant market in crypto in the US” but regulatory clarity is not being provided at the moment. If this persists, CoinBase will consider options to invest even more overseas, including relocating from the US to elsewhere.