EU hails ‘comprehensive regulation’ as MiCA crypto law passes

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The European Parliament has passed landmark cryptocurrency legislation that will introduce new rules for the industry across the 27-nation bloc.

Markets in Crypto Assets (MiCA) passed with 517 votes in favor and 38 against, with 18 abstentions, at a meeting in Strasbourg today.

Crypto firms such as Binance, Coinbase and Kraken hailed the passage of the landmark legislation, while Stefan Berger, the MEP who spearheaded the creation of the bills, said in an emailed statement that the Europe is now the first continent to have comprehensive regulation for crypto assets.

The results of the MiCA vote. Image: European Commission

For new coins to be approved in the EU, it must be ensured in the future that their business model will not endanger the stability of our currency, he said, writing in German. The new oversight structures will also be a bulwark against Lehman Brothers moments like crypto exchange FTX.

The MiCA legislation means that the EU will have a unified approach to the regulation of crypto assets across all 27 member states, allowing companies licensed in one country to transfer their business to others with minimal additional paperwork.

But to gain initial approval, companies will face much higher disclosure standards, including preparing a detailed white paper for each proposed asset. Stablecoin issuers, on the other hand, are subject to even stricter rules, including holding enough cash to safeguard customer funds.

MiCA will also ask crypto firms to report the environmental impact of their operations, in a compromise measure after lawmakers removed a blanket ban on the proof-of-work mechanism from a previous draft.

European Crypto Industry Hails Pivotal Moment

While concerns have been raised about MiCA’s potential administrative burden for small businesses, many crypto companies have welcomed the recognition of the industry by the European Union.

Today’s adoption of MiCA by the European Parliament is a pivotal moment for the crypto industry in the region, and the work of European policymakers should be seen as exemplary, said Tom Duff Gordon, Vice President of the international politics at Coinbase. The region recognizes the potential and societal promise that emerging technologies can offer. The EU is rising to the occasion, while other notable jurisdictions are struggling to provide a strong and consistent regulatory framework that gives clarity to a burgeoning innovative industry.

The vote also prompted crypto commentators to compare the EU’s approach to that of other countries.

Crypto needs a simple yet comprehensive legal framework to grow, Monty Metzger, founder of Liechtenstein-based exchange LCX, commented on Twitter. Earlier in the week, he suggested that MiCA showed that the US and Asia were falling behind in crypto regulation.

Regulation by enforcement like in the United States is not a solution, he added today. We need rules and guidelines to enable technological innovation.

Richard Teng, regional manager for Europe and MENA at Binance, said the regulatory landscape has changed with today’s vote.

MiCA will bring regulatory clarity to one of the biggest markets in the world, making the EU an even more attractive place for Web3 companies to innovate and attract talent, he said.

As with any regulation, the small details will be key, but overall we believe this is a pragmatic solution to the challenges facing the industry. At Binance, we put in place clear rules of the game for crypto exchanges to work in the EU. We will make the necessary changes to our business over the next 12-18 months to fully comply with regulations, protect users and support innovation.”

Mark Jennings, head of European operations at Crypto Exchange Kraken, hailed MiCA as a “tailored and pragmatic plan for allowing crypto-assets to operate within a regulatory perimeter.” He added that “what once seemed like an ambitious legislative goal could soon become a universal standard for customer protection and business efficiency, if the EU manages to implement this technical framework correctly”.

What happens next?

MiCA will not take effect immediately. Once approved by the European Council, it can officially become EU law. The EU securities regulator, ESMA, will then produce guidance on the details of the application of the regulations.

Companies and member states have leeway to catch up with the regulation, with the rules coming into force on stablecoins in July 2024, while other requirements will not be enforced until January 2025.

Parliament also today passed a separate law, the Remittances Regulations, with 529 votes in favour, 29 against and 14 abstentions. The regulation will require crypto operators to identify customers in an effort to combat money laundering.

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