EU agrees on MiCA regulation to crack down on crypto and stablecoins

Officials from the European Union (EU), have reached an agreement on a landmark law. This will make it harder for service providers and crypto issuers to operate under a single regulatory framework.

Stefan Berger, a member of the European Parliament and the MiCA regulation’s rapporteur — who is responsible for reporting on proceedings related to this bill — announced the news via Twitter that a “balanced deal” had been reached, making the EU the continent with the first crypto-asset regulation.

MiCA Trilog: Durchbruch! Europa ist der erste Kontinent mit einer Krypto-Asset Regulierung. Parlament, Kommission & Rat haben sich auf ausgewogene #MiCA geeinigt. Fur mich als Berichterstatter war wichtig, dass es hier keine Verbannung von Technologien wie #PoW gibt /1
— Stefan Berger (@DrStefanBerger) June 30, 2022

According to the European Council, this provisional agreement is known as the Markets in Crypto-Assets Framework (MiCA). It includes rules that cover unbacked crypto assets, stablecoins and trading platforms. It also covers wallets in which crypto-assets can be held.

Bruno Le Maire, French Minister of the Economy, Finance, and Industrial and Digital Sovereignty, claimed that the landmark regulation would “put an end to the Crypto Wild West.”

Stablecoins hobbled

The MiCA regulation was created in response to the collapse of TerraUSD. It aims to protect consumers and “request” stablecoin issuers build up sufficient liquid reserves.

Ernest Urtasun (a member of European Parliament) explained in a tweet that the reserves must be legally and operationally separated and insulated and must be fully protected in case there is insolvency.

It will have a daily transaction limit of 200 million Euros for stablecoins.

3/13 Large stablecoins are subject to stringent operational and prudential regulations. There will be restrictions on their widespread use as a payment method and a limit of 200 EURmillions per day.
— Ernest Urtasun (@ernesturtasun) June 30, 2022

Users of Crypto Twitter have already criticised the regulation, with daily Tether (USDT), at $50.40 Billion (48.13 Billion Euros), and USD Coin (USDC), at $5.66 Billion (5.40Billion Euros) at the time this article was written.

It would be difficult to enforce these rules for decentralized stablecoins like DAI.

The agreement was reached on the same day that Circle launched its Euro-backed stablecoin, Euro Coin.

We aim to make #EUROC, a Euro-backed digital money, a reliable, well-regulated, and MICA-conforming innovation as @circlepay brings it online.
— Dante Disparte (@ddisparte) June 30, 2022

Consumer protection

Providers of crypto-asset services (CASPs), will have to comply with strict requirements to protect consumers and could also be held responsible if investors lose their crypto-assets.

Urtasun stated that any tokens without a clear issuer like Bitcoin will require trading platforms to create whitepapers and will be held responsible for misleading information.

Consumers will be warned about the risks associated with crypto assets, as well as rules regarding fair marketing communications.

According to the European Council, market manipulation and insider trading are also under discussion.

“MiCA covers all market abuses related to any transaction or service, including market manipulation and insider trading.”

The new sheriff is ESMA

A provisional agreement will also require authorization for crypto-asset service provider (CASPs), in order to operate within the EU. The largest CASPS will be monitored by European Securities and Markets Authority, (ESMA).

ESMA, an independent regulator of securities markets in the EU was established in 2011.

The new law doesn’t ban proof-of work technologies nor include non-fungible tokens in its scope.

The European Commission stated that it is still investigating NFTs and may create a “proportionate, horizontal legislative proposal” to address market risks if necessary.

Coinbase seeks aggressive European expansion amid crypto winter

Circle’s Disparte stated that “Europe’s upcoming policy framework for crypto-assets will be to crypto what GDPR is to privacy.”

Before formal adoption, the provisional agreement must be approved by the Council of the European Parliament.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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