On the last day of June 2022, the European Union agreed on the main provisions of the law that will regulate the crypto industry. The bill was called Markets in Crypto-Assets, or MiCA. In short, the EU authorities want to oblige all crypto exchanges to provide personal data of customers, including information about transactions. Of course, many users have already begun to express their dissatisfaction. But how terrible is this law in reality? And what will it change radically in general?
Europe Crypto Regulation
To begin with, MiCA is not a new development. The law first appeared back in 2020, and it took European politicians about two years to finalize it. At the same time, the fact that the EU has agreed on a number of issues does not mean the immediate introduction of Markets in Crypto-Assets into operation. The law will come into force only in 2024 (unless something else happens before then). But what was the catalyst for the process, why did European leaders decide to pay special attention to the crypt right now? Firstly, this is the worst quarter in a decade for bitcoin (minus 56% of the value in the equivalent of the US dollar); secondly, we observed the failure of stablecoins and LUNA from Terra. Against the background of these events, the European regulator intends to introduce additional directives regarding stablecoins. According to the law, now all stablecoins will have to have specific large enough reserves for payments to their citizens. By and large, the EU simply decided to legalize what was stated by the developers themselves.
For ordinary buyers, this innovation has positive sides. It will become more difficult for some scam projects to exist on the market. At least in the legal field, not the shadow segment.
However, the global correction in the cryptocurrency market may well be considered a good reason to tighten the screws. In the end, no one is going to introduce additional control on the stock market against the background of a correction either (yet). But cryptocurrency regulation is literally called a significant event, which, according to the French Economy Minister, "will put an end to the Wild West" in the crypto industry in Europe.
On the other hand, the lack of significant competition in the industry will lead to the fact that the main suppliers of liquidity to the crypto will be literally just several major players who will pass all the requirements.
The EU Council and the European Parliament have reached an agreement and are on the way to implementing the "travel rules" for the crypto exchange in Europe. AML's "travel rule" is based on the principle that crypto asset service providers must collect and provide access to key data about the sender and beneficiary of transfers, similar to what global banks are currently doing for electronic transfers.
Regulators are also going to press exchanges and other crypto platforms. Now the European Securities Market Supervision Authority (ESMA) will be able to interfere and restrict the work of the sites if they do not provide "protection to investors", integration into the market, and financial stability.
One of the most essential requirements is the disclosure of personal information to the authorities, including information about transactions. For example, now you will be required to report transfers from an exchange or a crypto wallet if their value in monetary terms exceeds 1,000 euros.
By and large, the same thing is happening that happened to the stock market at the beginning of the XX century. The era of relatively free and profitable trade has sunk into oblivion after the state developed more and more laws to restrict this activity.
As a result, it is more and more difficult to earn money — for exchanges, increased control carries additional costs. And for citizens, supervision is twofold. On the one hand, in theory, you can turn somewhere if you get caught by scammers.
On the other hand, it completely contradicts the concept of the first cryptocurrency, which assumed anonymity and many other useful things. In addition, there are additional risks that your personal data will end up in the hands of intruders since they will be managed by third parties — representatives of state structures (ordinary people also work there, who are not always saints and sometimes use their position for selfish and illegal purposes).
Some of the key problems, according to critics, are that EU exchanges can deal with foreign exchanges that do not need to collect such information.
The law also requires mining companies to disclose information about the amount of energy consumed. Initially, by the way, they wanted to ban crypto mining in Europe altogether. There is an opinion that all this has nothing to do with ecology, perhaps such a restriction and attempts to ban (taking into account the imminent transition of Ethereum to PoS) are primarily aimed at bitcoin, which is still not the most convenient asset on the blockchain to control the movement of large capitals.
NFT was also on the agenda of politicians. Now acts of fraud with digital art objects have become more frequent. In this regard, the EU has been thinking about the limitations of OpenSea-type sites. For now, however, they decided to postpone further decisions on this issue. In the next year and a half, it will be decided whether a separate document regulating non-interchangeable tokens is needed or not. But since they have already thought about it, then obviously the NFT will be regulated — give it time.
The crypto industry is developing, and, of course, the state will try to regulate it. The new legislation will undoubtedly be a shock for a number of EU crypto companies, although major players like Binance or Coinbase are unlikely to be knocked out of the rut. But if you read the White Paper from Satoshi Nakamoto in 2022 with his goals, for which the decentralized electronic cash was created, it becomes clear that the interests of the financial regulator are diametrically opposed.
Many consider the proposal to create a new pan-European anti-money laundering body, which is currently headed by the European Banking Authority (EBA), to be the central element of the package.
However, the updates still need to be confirmed by the Council and Parliament before they can be officially adopted by the EU member states.
The Parliament, the Council, and the European Commission are currently working on the technical aspects of the text. After that, the agreement must be approved by the Committees on Economic and Monetary Affairs, Civil Liberties and Justice, as well as the Parliament as a whole, before it enters into force.