The European Union’s set of beefed-up cryptocurrency rules was given final approval by member states on Tuesday, giving the 27-nation bloc a global lead in regulating the sector. The rules, known as Markets in Crypto Assets (MiCA), are expected to start taking effect in phases starting in July 2024.
The tighter European scrutiny follows a spate of high profile crypto scandals, including the collapse of trading firm FTX and the implosion of the TerraUSD stablecoin. The rules are aimed at improving transparency and combating money laundering and will cover stablecoins – which are usually tied to a hard currency or a commodity like gold that make them less volatile than normal cryptocurrencies. Other digital tokens as well as bitcoin-related services such as trading platforms and digital wallets are also subject to the rules, but not bitcoin itself.
Under MiCA, crypto companies will need approval to operate in the EU and be held liable if they lose investors’ assets. Authorities will compile a public list of ‘noncompliant’ companies. The rules, aimed at maintaining financial stability, include provisions to combat market manipulation and insider dealing. Companies issuing or trading crypto assets will have to disclose information on the risks, costs and charges that consumers face. Major crypto companies will have to reveal how much energy they use.
The US has made little progress in stepping up oversight of cryptocurrencies and digital assets, while the UK is considering feedback on proposed crypto regulations that it outlined last year. Some European countries, like Germany, already have basic crypto regulations.