Three main European institutions – Council, Parliament, and Commission could finalize details for the two most important crypto regulations in the region when they meet on Thursday this week. The leaders will discuss the remaining details of the Markets in Crypto Assets (MiCA) and Transfer of Funds Regulation bills which are expected to have huge implications for crypto markets in the region.
The regulations seek to establish a framework for the usage of cryptos in the European Union and prevent crypto crime and money laundering. The framework also aims at introducing several measures to protect crypto customers and investors. Once finalized, the parliament will vote on the MiCA regulation before it comes to force.
The European Union leaders are yet to agree on a few main issues in the proposed regulations and the final Thursday trialogue meeting is expected to solve this. The first issue is whether MiCA regulation should be expanded to include NFTs and the second is whether Crypto Asset Service Providers (CASPs) will need to require identity verification of non-hosted wallets transacting through them. Also yet to be decided upon is whether CASPs should report transfers coming from non-hosted wallets. It is unclear whether all the parties support the inclusion of NFTs for customer protection.
However, it is already clear among the leaders that the AML regulations in TFR will cover all crypto transfers done by customers through CASPs, without any minimum limit exclusions.
The regulations cover stablecoins and their issuers – especially issuers of asset-backed tokens and e-money tokes – will be under strict watch. They will need to be licensed to issue stable coins, failure to which they will not be admitted on EU trading platforms anymore. Those that choose to be authorized will risk having their issuance curbed or yield services on the stable coins prohibited.
The leaders are also yet to finalize discussions on how authorities will supervise and stop stablecoin issuance if they are being used for large-scale payments.
However, the regulation will not be banning Bitcoin and other proof-of-work-based cryptocurrencies as has been alleged by some media. The regulations also exclude peer-to-peer wallet transfers in all cases. Decentralized financial applications are also not included in the MiCA regulation. The EU Commission will however keep tracking the issue of the need for regulation in the field. It will later launch a pilot project on Defi supervision.
Nevertheless, this regulation is being opposed to some degree by many industry proponents.