Jun 28, 2024 12:25
The European Union is set to become the worlds rstsignicant jurisdiction with a tailored, comprehensive crypto law through itsMarkets in Crypto Assets regulation (MiCA), which will take effect in 2024.This legislation promises to provide legal certainty and introduce compliancechecks to enhance its consumer protection efforts.
Compliance-Related Updates and the Key Provisions of MiCA
Transparency and disclosure: Crypto issuersmust publish detailed white papers outlining the specics of the crypto-assets,including potential risks and environmental impacts. These white papers must betransparent, fair, and non-misleading.
Consumer protection: Providersmust act in the best interest of their clients, offering transparentinformation about pricing, fees, and risks associated with crypto-assets. Cryptoassets must be kept separate from providers' own assets, and client complaintsmust be handled promptly and effectively.
#MiCA, the Markets in Crypto-Assets Regulation, is the most comprehensive cryptocurrency regulation in the world. It was recently adopted by the European Parliament and is expected to come into force in 2024.Let's read more about it pic.twitter.com/dWxSPcSnwx
LCX (@lcx)
October 4, 2023Market integrity: MiCAincludes measures to prevent market abuse, such as insider trading andmanipulation. It mandates the public disclosure of inside information andenforces strict rules against the unlawful dissemination of insiderinformation.
Prudential requirements: Providersmust maintain adequate nancial resources, including meeting minimum capitalrequirements and having recovery plans to address potential nancialdiculties.
Transition period: Atransitional regime allows existing crypto-asset service providers to continueoperating while they apply for the new MiCA licenses. This period extends until2026, providing time for adaptation to the latest regulations.
Regulating Stablecoins
A significant portion of MiCA focuses on stablecoins,cryptocurrencies tied to the value of other assets, like traditionalcurrencies. In MiCA, stablecoins are categorized as "e-money tokens"(EMTs) if they are linked to the value of a at currency or"asset-referenced tokens" (ARTs) if they are linked to other assets.These tokens must maintain appropriate reserves and be well-managed.
The regulations become stricter as the use of these tokensincreases. To prevent them from undermining the euro, stablecoins not pegged toan EU currency are prohibited from exceeding 1 million daily transactions. Therules also apply to algorithmic stablecoins, like TerraUSD, which use automatedcoding to maintain their value.
The application of MiCA to non-fungible tokens (NFTs)remains to be seen, and regulators may need to examine each token individuallyto determine if it is unique or interchangeable.
This decision could have far reaching consequences with regards to how NFTs are marketed and resold as it may play a key role in determining if it is a security per the Howey Test. Must read. https://t.co/QodwOJqlcB#NFT #legal #law #crypto
lawyr.eth (web3 lawyer) (@ethlawyr)
February 22, 2023Incentives for the European Crypto Industry
The EU crypto industry has largely supported MiCA,recognizing the high stakes of noncompliance, which could result in penaltiesreaching millions of euros or up to 12.5% of annual turnover. In return,licensed crypto providers receive a "passport" to operate across amarket of 450 million people and gain clarity on regulatory expectations.
Future Directions for Crypto Regulation in Europe
MiCA will take effect on December 30, 2024, with stablecoinprovisions starting six months earlier in June to allow time for industry andregulators to prepare. However, MiCA is not the nal chapter in cryptoregulation.
Other EU laws impacting the crypto sector address moneylaundering, tax avoidance, bank capital, cybersecurity, and distributed ledgertechnology-based securities trading. Future regulations may build upon thecategories established by MiCA. By mid-2025, the European Commission will report on the needfor additional laws to address NFTs and decentralized nance.
Under upcoming MiCA rules some stablecoins will face restrictions as unauthorized stablecoins.Binance won't delist any unauthorized stablecoins on spot but will limit their availability for EEA users only on certain products, such as launchpool and earn, and will propose
Binance (@binance)
June 3, 2024In light ofrecent market turmoil, some argue for stricter regulations, suggesting a shift from MiCA's tailoredapproach to one more closely aligned with conventional securities regulations.Time will tell!
This article was written by Sarafina Wolde Gabriel at www.financemagnates.com.
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