New EU Legislation Sets Standards and Safeguards for Growing Crypto Asset Market
MEPs have given their approval to the first piece of EU legislation that focuses on tracking transfers of crypto-assets such as Bitcoin and electronic money tokens.
The legislation, which was agreed upon by negotiators from the Parliament and Council in June 2022, received a total of 529 votes in favour, 29 votes against, and 14 abstentions.
The main objective of the legislation is to ensure that all crypto transfers can be traced, just like any other financial transaction, and suspicious activities can be prevented. To achieve this, the “travel rule” that is already applied in traditional finance will now extend to crypto transfers.
This means that information about the origin of the asset and the recipient must be included in the transaction and stored on both sides of the transfer.
The new law will also cover transactions above €1000 that involve self-hosted wallets (i.e., crypto wallets owned by private individuals) when they interact with hosted wallets managed by crypto service providers. However, it will not apply to person-to-person transfers that are conducted without any provider or between providers who act on their own behalf.
Uniform EU market rules for crypto-assets
The Plenary has given its final approval, with 517 votes in favour, 38 against, and 18 abstentions, to new common rules on the supervision, consumer protection, and environmental safeguards of crypto-assets, including cryptocurrencies (MiCA).
These rules will apply to crypto-assets that are not currently covered by existing financial services legislation.
The main aim is to ensure transparency, disclosure, authorization, and supervision of transactions involving the issuing and trading of crypto-assets such as asset-reference tokens and e-money tokens. Consumers will be better informed about the risks and costs associated with these operations.
Furthermore, the new legal framework will support market integrity and financial stability by regulating public offers of crypto-assets.
The agreed text also includes measures to prevent market manipulation, money laundering, terrorist financing, and other criminal activities.
The European Securities and Markets Authority (ESMA) will set up a public register for non-compliant crypto-assets service providers that operate in the European Union without authorization.
To reduce the carbon footprint of crypto-currencies, significant service providers will have to disclose their energy consumption.
Overall, the new rules aim to provide safeguards against market manipulation and financial crime while promoting transparency, consumer protection, and environmental responsibility in the crypto-asset industry.
The next stage is for the Council to formally approve the texts before they are published in the EU Official Journal. Once published, they will become effective 20 days later.
By passing this legislation, the Parliament is addressing the public’s demand to establish guidelines and protections for the use of blockchain technology, as outlined in Proposal 35(8) of the Conference on the Future of Europe‘s conclusions.