EU Council Takes Crypto Legislation Over Final Hurdle

May 18, 2023
The Markets in Crypto-Assets Regulation and the Transfer of Funds Regulation have now both passed the final stages.

The Markets in Crypto-Assets Regulation (MiCA) and the Transfer of Funds Regulation have now both passed the final stages.

Setting an EU-level legal framework for this sector for the first time, the European Council has adopted the MiCA regulation.

The EU’s legislation will now bring crypto-assets, crypto-assets issuers and crypto-asset service providers under its new regulatory framework.

“I am very pleased that today we are delivering on our promise to start regulating the crypto-assets sector,” said Elisabeth Svantesson, minister of finance in Sweden, which currently holds the presidency of the EU.

Svantesson continued that recent events have confirmed the urgent need for imposing rules: “This will better protect Europeans who have invested in these assets, and prevent the misuse of crypto industry for the purposes of money laundering and financing of terrorism.”

The European Commission presented the MiCA proposal in September 2020 as part of its Digital Finance package.

MiCA aims to protect investors by increasing transparency and putting in place a comprehensive framework for issuers and service providers, including compliance with the anti-money laundering rules.

The new rules cover issuers of utility tokens, asset referenced tokens and so-called stablecoins.

It also covers service providers such as trading venues and the wallets where crypto-assets are held.

As this is the final step in the legislative process, the legislation will now enter the Official Journal of the European Union, and come into force 20 days after that.

After this, companies will have between 12 and 24 months to prepare for compliance across a variety of requirements in the legislation.

Transfer of Funds Regulation

The same applies with new rules regarding crypto transfers.

This legislation is derived from the Financial Action Task Force’s travel rule.

Under the new rules, crypto-asset service providers are obliged to collect and make accessible certain information about the sender and beneficiary of the transfers of crypto-assets they operate, regardless of the amount of crypto-assets being transacted.

This ensures the traceability of crypto-asset transfers to be able to better identify possible suspicious transactions and block them.

According to Svantesson, the new rules are “bad news” for those who have misused crypto-assets for their illegal activities, to circumvent EU sanctions or to finance terrorism and war.

“Doing so will no longer be possible in Europe without exposure. It is an important step forward in the fight against money laundering.”

Although no one will know the true outcome of the EU’s work on crypto until they need to comply, the MiCA proposal in particular has garnered fans including Binance and Coinbase.

A blog by the latter said that the legislation has “made Europe instantly more attractive as a destination for crypto firms”.

Crypto sources in Brussels have suggested that the compromise that has been reached by political institutions is welcome, particularly as issues such as a ban on energy intensive, proof of work crypto mining have not made the final MiCA text.

These ideas were pushed in particular by the left-leaning factions within the European Parliament.

According to one source, negotiations over the legislation became “toxic” at times, with some members of the European Parliament being suspicious of crypto-assets.

“It is ironic that the left has chosen to side with the anti-crypto banks,” the source told VIXIO.

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