European Parliament Approves MiCA: Crypto Leaders Share Their Thoughts

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FinanceFeeds shares insights from crypto industry leaders Quant, Kraken, and Xapo Bank, including the impact of MiCA regulation and what to do next.

The European Parliament yesterday approved the first rules to trace crypto-asset transfers, prevent money laundering, as well as provide oversight and customer protection.

After 529 votes in favour, 29 against and 14 abstentions, this first European piece of legislation marks an important milestone for the crypto asset ecosystem in the region at a time of great uncertainty in the United States.

The texts will now have to be formally approved by the Council, before publication in the Official Journal of the EU. They will come into effect 20 days later.

Crypto Transfers Should Always Be Traced, Suspects Blocked

The regulation aims to ensure that crypto transfers, as with any other financial transaction, can always be traced and suspicious transactions blocked.

The so-called travel rule, already used in traditional finance, will cover transfers of crypto assets in the future. Information about the source of the asset and its beneficiary will need to travel with the transaction and be stored on both sides of the transfer.

As previously covered by FinanceFeeds, the law will also cover transactions over 1000 from so-called self-hosted wallets (a private user’s crypto-asset wallet address) when interacting with hosted wallets operated by cryptocurrency providers. crypto-asset services. The rules do not apply to person-to-person transfers made without a supplier or between suppliers acting on their own behalf.

MiCA tackles market manipulation and money laundering

With 517 votes in favour, 38 against and 18 abstentions, the Plenary also gave its final green light to new common rules on oversight, consumer protection and environmental safeguards for crypto-assets, including cryptocurrencies (MiCA ). The draft law informally agreed with the Council in June 2022 includes safeguards against market manipulation and financial crime.

MiCA will cover crypto-assets that are not regulated by existing financial services legislation. Key provisions for those who issue and trade crypto-assets (including asset reference tokens and e-money tokens) cover transparency, disclosure, authorization and supervision of transactions. Consumers would be better informed of the risks, costs and charges associated with their transactions. Additionally, the new legal framework will support market integrity and financial stability by regulating public offerings of crypto-assets.

The agreed text includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities. To combat money laundering risks, the European Securities and Markets Authority (ESMA) should set up a public register of non-compliant crypto-asset service providers that operate in the European Union without authorisation.

What will be the impact and what to do next?

FinanceFeeds shares insights from crypto industry leaders Quant, Kraken, and Xapo Bank, including the impact of MiCA regulation and what to do next.

Gilbert Verdian, Founder and CEO of Quant, said: “The passage of the first set of comprehensive digital asset regulations is encouraging. It will be interesting to see how well the UK aligns with EU regulations, or if it takes a more open approach to boosting trade and economic growth. Rules should be flexible, dynamic and evolve over time. Ultimately, however, regulation can be a force for good. This is a clear sign that the industry is reaching a much-needed new stage of maturity. It can lay the rails to encourage the development of new and better forms of money, simultaneously protecting consumers and markets. While each jurisdiction will take a slightly different approach to protecting its national interests, the EU leads the way.

“This new regulation also balances the need for central banks to mitigate systemic economic risk, against stablecoin development and innovation. There are cheaper bonds for smaller stablecoins; and NFTs are out of scope. Blockchain will have a profound impact on financial services, particularly asset management via tokenization of funds, capital markets, and perhaps most importantly, tokenized commercial currency and digital bank currencies. power stations. This emerging technology can significantly reduce costs by reducing the need for complex counterparties and processes, enabling new business and revenue opportunities.

Mark Jennings, Head of European Operations at Kraken, said: MiCA is a bespoke and pragmatic plan for allowing crypto-assets to evolve within a regulatory perimeter. 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 properly implement this technical framework.

“The eyes of the crypto world are rightly on Europe as MiCA enters this home stretch. There are three key areas that European policymakers will need to focus on moving forward:

1. Prioritize a structured transitional arrangement between national VASP schemes and a pan-European framework with universally accepted grandfathering processes. This is currently at the discretion of each EU member state. However, a coordinated approach could be more beneficial for stakeholders, while being in the pan-European spirit of MiCA.

2. Ensure consistent implementation of MiCA across Member States, especially at the licensing stage, to ensure a level playing field and avoid regulatory arbitrage.

3. Establish MiCA to be harmonized and compatible with international standards for financial markets worldwide. MiCA will be a difficult act for some jurisdictions to follow, so prioritizing global coordination before technical implementation will benefit all parties in the long run.

Joey Garcia, Director and Head of Public Affairs at Xapo Bank, said: “We strongly welcome the raising of standards for crypto asset service providers across the EU that have operated within a prudentially supervised VASP framework which has been set up in 2018 in Gibraltar. The EU has also closely followed the “same business, same risk, same rules” principle and of course, while we fully support the creation of a safe environment for digital finance, it will be interesting to see if the “same rules” can be applied proportionally to a young and innovative industry.

“Beyond MiCA as well, the wider implications around the EU’s digital finance package will also need to be considered by the industry. Whether capturing non-hosted wallet transfers under the EU Money Transfer Regulation can be introduced effectively, or the implications of proposed AML regulations under the supervision of the new Anti-Money Laundering Agency restricting transfers over EUR 1,000 from a platform unregulated or self-hosted.

“What will be the implications for DeFi integrations and crossovers? Likewise, if the categorization of virtual assets into new categories is also constructive and forward-looking, are the rules proportionate to the industry? are they introducing a technology offense where the use of blockchain-based systems will essentially trigger regulation of financial services, regardless of activity? Will all European authorities interpret the Regulation in the same way? There will undoubtedly be many interesting developments over the next few years. From our perspective, operating to standards of governance, risk management, protection of customer assets, resilience, customer service and market integrity are not new concepts for VASP. Xapo regulated, so we welcome the introduction of higher standards that go beyond simple AML. registrations. »

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