The European Union (EU) member countries have agreed on a uniform law that could make business tougher for crypto service providers within the bloc.
According to Stefan Berger, an EU Parliament member and spokesperson for the new bill, a deal has been made, signaling the beginning of stricter regulations in Europe.
Accordingly, this made Europe the only continent with comprehensive crypto-asset regulations following the landmark announcement.
Before the latest development, there was a Market in Crypto Assets (MiCA), a provisional agreement between the EU bloc. The MiCA rule regulates the activities of unhosted wallets, stablecoins, and crypto exchanges.
So far, the landmark ruling has the backing of all EU member states, with France’s Minister of Economy, Bruno Le Maire, stating that the new guidelines are the end of the crypto wild west in Europe.
Stablecoins Need Protection
Following the dramatic meltdown of the Terra UST, the MiCA Regulations were crafted to protect consumers. The regulation requires stablecoin issuers to have enough liquid reserves.
A member of the EU Parliament, Ernest Urtasun, explained that the reserve must be segregated and fully differentiated from the main balance sheets of service providers. It will go a long way towards handling insolvency.
Meanwhile, the new rule comes with a daily cap of 200 million stablecoin transactions.
Furthermore, crypto-asset service providers (CASPs) must comply strictly with the requirements designed to protect consumers. In addition, they would also be held accountable for any loss of investors’ digital assets.
Urtasun added that trading platforms must tender whitepapers for any token without a known issuer. They will also be liable for any misleading information given to consumers.
One noticeable aspect of the provisional regulation is the notion that crypto service providers would need authorization to operate within the EU.
Additionally, the European Securities and Market Authority (ESMA) will oversee the activities of the biggest CASPs. Founded in 2011, ESMA is a securities market regulator monitoring the EU bloc.
However, EU legislators did not include non-fungible tokens (NFTs) and proof-of-work (PoW) regulations in the new law. But the European Commission noted that NFT regulations would become the next area of focus once the current storm is over.
Crypto Users Kicked Against MiCA
The new guidelines did not go down well with most crypto users; as a rule, they have already been branded as unworkable. The stablecoin ecosystem is a multi-million venture, and such regulation as MiCA will stunt its growth.
Moreover, critics point out that the decision-makers failed to factor in the different structures of stablecoins and cryptocurrency before approving the new law.
For example, it would not be easy to regulate decentralized stablecoins like DAI. Likewise, not all stablecoins have the same risk factors, and not all are traded the same way.
Therefore, reviewing the law may be necessary to include some crypto assets.
It will be interesting to see how regulators accommodate some of these complaints as the race to crackdown on crypto-assets begins.