EU Greenlights the MiCA Law, Introducing New Rules for the Crypto Space in Europe

by

It took a few years in the making, but the European Union has finally greenlighted the controversial MiCA law. Short for Markets in Crypto Assets, it was passed by the EU legislature last week with 571 votes in favor and only 38 against. The new law will supervise and regulate the crypto space in Europe, while providing customer protection and adding environmental safeguards for digital assets.

Legislators have introduced mechanisms that will allow them to trace crypto transactions. The law will extend to private wallets too, especially above a certain threshold. Crypto fans and investors are not happy about it, but it was announced over a year ago, and will finally regulate the European crypto industry, hopefully for the better.

A Groundbreaking Law

Right after voting the bill into law with almost anonymous backing, regulators have called it a ‘groundbreaking solution’. The law is the world’s first advanced crypto regulation package. Many countries just update existing laws on digital assets to regulate the crypto space. But, the EU’s solution is far more comprehensive and will cover the issue and trade of digital assets that aren’t covered by existing financial laws.

With MiCA, consumers will be more informed about the risks associated with cryptocurrencies and any fees and extra costs linked to these operations. The law will also license crypto payment providers and establish registration framework for non-compliant companies. The goal of MiCA is to reduce the risk of money laundering, terrorist financing, and market manipulation. The law will also reduce the carbon footprint of cryptocurrencies and oblige large companies to disclose information about energy consumption.

With more than 10,000 different crypto assets in the European Union, the regulation brings a major competitive advantage for the EU. It puts its at the forefront of crypto economy, protecting customers from the eventual downfall of negative events such as FTX’s demise. With the new law, the EU parliament hopes to regain trust. MiCA brings regulator clarity that’s not available elsewhere – not in the USA or any other country.

When Will It Go Live?

The law will go into effect once formally endorsed by the EU Council, and 20 days after being published in the official EU journal. While regulators are excited for the changes it’ll bring, investors and crypto companies are worried. With MiCA, the EU can take a deep look in all their transactions, which might have a negative impact on the whole industry.

Besides passing MiCA into law, another voting that didn’t get that much publicity was the vote on approval rules that will allow the EU to trace crypto transfers. This is an additional legislation that passed somewhat unnoticed, and it’s the part of the legislation package crypto companies fear the most. It ensures that cryptos and digital assets can always be traced and blocked if they’re suspicious. It remains to be seen if the EU uses this to blacklist private, self-hosted wallets whenever they exceed over €1,000 as the law implies.

Luckily, it won’t apply to person-to-person transfers without the involvement of a provider, which is a bit of a relief.