The law change will come into effect in 2024 as the EU leads token economy regulation.
The European Union has become the first major jurisdiction to introduce a comprehensive cryptocurrency law. On Thursday, lawmakers voted overwhelmingly in favour of the Markets in Crypto-Assets (MiCA) licensing regime by a resounding 517-38, with 18 abstentions.
The move was followed by the approval of the Transfer of Funds regulation, which requires crypto operators to identify their customers to prevent money laundering.
The European Commission’s Mairead McGuinness hailed the vote as a “world first” in crypto regulation, adding that the rules will apply from next year.
The aim of the new framework is to protect consumers and ensure financial stability while establishing the EU as a leader in the growing token economy. The primary provisions of the regulation will start to apply just over 12 months after publication in the EU’s official journal, likely in June 2024.
The MiCA outlines various rules, such as:
- Tighter rules on stablecoins, including maintaining reserves of assets that back up tokens.
- Upfront disclosures about risks, including a white paper that discloses the necessary information about the crypto-asset. (The white paper requirement doesn’t apply to NFTs.)
- Unifying rules across all 27 member states, making compliance easier.
The European Securities and Markets Authority (ESMA) also welcomed the vote, stating that it would announce its timetable for drafting secondary legislation under MiCA in due time.
The decision has put the EU in a leadership position in the regulation of crypto, setting an example for other jurisdictions worldwide.
The framework is welcomed news amidst an increasingly strained regulatory landscape in the US.
Last week, the US Securities and Exchanges Commission (SEC) announced its approach to regulation involves defining DeFi systems them as traditional exchanges, provoking strong dissent. Brian Armstrong, CEO of US-based exchange Coinbase, went as far as stating that the exchange is considering moving its HQ to the UK in the coming years of the US regulatory landscape fails to provide clarity.
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