- The European Commission, EU lawmakers, and member states agreed upon a law to regulate crypto markets.
- The stablecoins operating in the European Union region will now be supervised by the European Banking Authority (EBA), with the presence of the issuer in the EU being a precondition for any issuance.
After months of deliberation on whether to regulate crypto assets or not, the European Union reached a provisional agreement on its landmark Markets in Cryptoassets (MiCA) bill. For the first time such as law has been passed on a large scale, which was agreed upon by the European Commission, EU lawmakers, and member states.
The law intends to regulate the digital asset sector, and the rules will be common to all 27 states in the EU. The regulations come at a time when the cryptocurrency market is facing one of the worst quarters in over a decade.
The setting of the MiCA bill will give the end-users the much-awaited relief against the risks associated with the investment in crypto assets. It will help them safeguard themselves during situations such as a project collapse, and others.
At a glance
In the wake of the stablecoin collapse, with the new bill, the stablecoin issuers will have to maintain sufficient reserves with a 1:1 ratio and partly in the form of deposits. The idea is to protect the consumers from losing money in such a scenario. This will help the stablecoin holders to get a timeframe in which they stake their claim free of charge.
Besides, the stablecoins operating in the European Union region will now be supervised by the European Banking Authority (EBA), with the presence of the issuer in the EU being a precondition for any issuance.
The European Securities and Markets Authority (ESMA) will be developing a draft regulatory aspect. The European Commission has to provide a report on the environmental impact that cryptos will have.
In addition to this, it will also set a minimum parameter to meet the sustainability standards for consensus mechanisms, such as that of Proof-of-Work.
The bill will also look into the energy consumption around the cryptos. The firms launching their tokens will have to disclose their consumption patterns and how will it impact the environment.
With the MiCA bill now coming to force, this will mark an important landmark in the regulatory aspect of cryptocurrencies. The MiCA bill has provided a template to other countries that are mulling how to go about the regulations.
For now, though, besides the peripheries of stablecoins and usual crypto assets, Non-fungible tokens (NFTs) will be excluded from the scope except if they fall under existing crypto-asset categories. However, European Commission will continue to monitor the NFTs and if deemed necessary will add them as emerging risks of such new market.
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