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EU Parliament Approves Crypto Licensing & Money Transfer Rules

• The European Union (EU) recently voted in favour of the Markets in Crypto-Assets regulation (MiCA), making it the first major jurisdiction to introduce a comprehensive crypto regulatory framework.
• MiCA will be enacted to reduce the risks for consumers purchasing crypto assets, as well as impose several requirements on crypto platforms, token issuers and traders around transparency, disclosure, authorization and supervision of crypto transactions.
• Additionally, the EU Parliament also approved a separate law known as the Transfer of Funds regulation to reduce the anonymity involved in transferring cryptocurrencies such as Bitcoin.

EU Parliament Approves New Crypto Licensing Regime

The European Union (EU) recently voted in favour of the landmark Markets in Crypto-Assets regulation (MiCA), making it the first major jurisdiction to introduce a comprehensive crypto regulatory framework. MiCA will take effect in 2024 and aims to reduce risks for consumers purchasing crypto assets by imposing several requirements on crypto platforms, token issuers and traders around transparency, disclosure, authorization and supervision of their activities. Additionally, MiCA grants powers to the European Securities and Markets Authority (ESMA) to ban and restrict platforms deemed not adequately protecting investors or threatening financial stability or market integrity. It also addresses environmental concerns by compelling firms to disclose their energy consumption.

Transfer of Funds Regulation

In addition to MiCA, lawmakers also approved a separate law known as the Transfer of Funds regulation to reduce the anonymity involved in transferring cryptocurrencies such as Bitcoin. This rule requires operators to screen, record and communicate information on senders and recipients when transferring funds between exchanges or self-hosted wallets that exceed 1,000 euros.

Requirements Imposed by MiCA

Under MiCA’s rules:
• Crypto asset providers may become liable should they lose investors’ funds;
• Stablecoins such as Tether (USDT) and Circle’s USDC must maintain a sufficient reserve should a mass withdrawal occur;
• Firms must disclose their energy consumption;
• Platforms must protect investors from risks associated with investing into digital assets;

Risks Associated with Digital Assets

MiCA is intended to protect investors from potential risks associated with investing into digital assets by introducing safeguards such as mandatory authorizations for all types of activities related cryptocurrency trading operations. Moreover, ESMA has been granted powers under this new rule that allow them ban or restrict any platform deemed not adequately protecting investors or threatening financial stability or market integrity.

Disclaimer

                                                                                                                                                                                             
 This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice