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A busy week in Europe as the final text for the Market in Crypto-Assets (MiCA) regulation is published, the European Banking Authority tenders a contract to help it improve its crypto data analysis, and Italy is criticised for having a light touch on company registration. Meanwhile in Argentina, a state-owned energy company diversifies into crypto mining.
The European Council has approved a final version of its landmark MiCA regulation, clearing the way for the bill to become law if the European Parliament agrees with its current wording.
In a note published on October 5, the European Council said its Permanent Representatives’ Committee, i.e., delegates from each member state, has endorsed the latest version of MiCA, and will now submit the bill for parliamentary approval.
As reported by VIXIO last month following our sneak peak at the final draft, the 377-page bill has undergone significant revisions since it received provisional approval from the Council and Parliament in June this year.
Notably, its former provisions on decentralised finance (defi) and non-fungible tokens (NFTs) have been dropped.
Instead, lawmakers have decided to take a wait and see approach to both areas. For example, EU authorities must assess the development of defi products and services on a periodic basis, and should formulate potential regulatory approaches as they see fit.
So far, MiCA has drawn praise from some of the most influential figures in the crypto industry, including Binance CEO Changpeng Zhao, who called it “fantastic”, and Circle’s Dante Disparte, who said that MiCA “will do for crypto what GDPR did for privacy”.
“What Europe’s policymakers have called for may on the surface seem onerous and anti-innovation to MiCA’s detractors, but deeper down it offers a pathway for Europe to emerge as a competitive region for the safe, sound development of an always-on financial system,” said Disparte.
However, others such as Robert Kopitsch, secretary-general of Blockchain for Europe, have warned that due to the length and complexity of the MiCA text, it will be challenging for smaller companies to comply.
"If you are not a big company, is MiCA such a blessing? MiCA will probably be more costly than it should be, as its final form is quite complicated," he said.
Nonetheless, in a new explainer piece on MiCA, the Dutch central bank said crypto firms large and small should study the text and prepare themselves for its implementation, which is expected to be in 2024.
EBA seeks crypto data subscription
Moving to another EU regulator, this week the EBA revealed that it is seeking data providers on blockchain analytics and crypto-asset markets.
In a new tender offer, the EBA said it has a budget of €240,000 for blockchain analytics and forensics data, and a budget of €120,000 for crypto-assets data.
The EBA said its aims are to monitor and assess developments in the crypto-asset markets, including the exposure of adjacent sectors, such as banking and payments, so that it can understand the industry and foster consumer protection.
Additionally, the EBA plans to leverage the data to prevent the use of the EU financial system for the purposes of money laundering and terrorist financing.
Once the tender is fulfilled, the EBA said its new data providers will help contribute to the development of AML/CTF policy, and will help the EBA coordinate and foster effective cooperation and policy implementation with other authorities.
Elliptic quantifies crypto money laundering
The EBA tender coincides with the publication of a new report from Elliptic, a UK-based blockchain analytics firm, on the growing use of decentralised exchanges (DEXs), cross-chain bridges and coin swaps for money laundering purposes.
Elliptic’s headline finding is that these three types of crypto platform have helped criminals to launder at least $4.1bn worth of illicit proceeds since their inception.
Some $1.2bn of stolen crypto from defi or exchange thefts have been swapped using DEXs, which is more than a third of all crypto stolen from the incidents surveyed by Elliptic.
A further $1.2bn in illicit assets has been laundered using coin swap services, which allow users to swap assets both within and across blockchains without opening an account.
Elliptic notes that many of these services are advertised on Russian cybercrime forums and cater almost exclusively to a criminal audience.
Finally, there is a growing trend of state actors and terrorist entities using these services to launder money and evade sanctions.
Wallets connected to groups sanctioned by the US, including the North Korean government, are believed to have laundered $1.8bn through the three platform types.
“These findings highlight the rise of the ‘cross-chain problem’ — an issue prevalent across the crypto space that poses key risks for virtual asset services and criminal investigators,” said Elliptic.
As reported by VIXIO in August, the Financial Action Task Force (FATF) also targeted money laundering through cross-chain transactions, or “chain hopping”, in its June 2022 report on virtual asset risks.
Italy registers 73 crypto firms in nine months
Staying in Europe, an Italian regulator has come under fire for its “light touch” approach to crypto firms seeking registration in one of the continent's largest markets.
This year, the Organismo Agenti e Mediatori (OAM) has registered 73 individual crypto firms in no less than nine months, but the agency will not be vetting any of the new arrivals for compliance until next year.
Crypto titans such as Binance, Coinbase and Crypto.com have all registered with the OAM this year, with one of the main prerequisites being a company address within the country.
However, according to a CoinDesk investigation, both Crypto.com and Coinbase have listed the same address in the OAM registry.
Coinbase said it does not have its own office in Italy, but the listed address is used by its accountant, while Crypto.com did not respond to a request for comment.
Francesco Dagnino, managing partner at Italian law firm Lexia Avvocati, told CoinDesk that he believes Italy is one of the easiest jurisdictions for crypto firms to register in.
In contrast, when the UK launched a temporary registration regime for crypto firms in December 2020, 106 firms joined the list before it was shut down at the end of March this year.
However, to date, only 38 of those firms managed to obtain full registration. Revolut, whose application was permitted to run beyond the March 31 deadline, became fully registered last week after waiting more than a year on the waiting list, as reported by VIXIO.
Argentine state energy company spots crypto mining opportunity
Finally, an update from high-inflation Argentina, where a state energy company has revealed that it has moved into crypto mining.
YPF, a state-owned oil and gas company, has completed a three-month pilot scheme in which it used flaring — the burning of natural gas associated with oil extraction — to power a cryptocurrency mining operation.
“This is a new technology that transforms gas into a blockchain processing format, generating income in dollars for the country,” the company said in a statement, as quoted by Argentine news agency La Nacional.
“The pilot involves the use of 1.4MW of installed capacity to perform blockchain mining from servers installed on site. The servers are operated by a leading blockchain mining company.”
As noted in a previous Week In Crypto, Argentina’s official annual inflation rate is currently just shy of 80 percent, leaving citizens and businesses alike scrambling for alternative stores of value.
