The European Union on Thursday reached a provisional agreement on the world’s first set of comprehensive rules to regulate what a lawmaker called the “Wild West” crypto market.
What are the new rules?
Crypto firms that wish to issue and sell digital tokens in an EU state must obtain a license from a national regulator.
The license would allow operators to serve an entire 27-country block from a single base, and be liable for losing crypto from consumers’ digital wallets.
Currently, companies show to the EU national regulator that they have adequate controls in place to prevent money laundering, but they can only operate within that country.
National watchdogs should update EU securities watchdog ESMA about any major operators they have authorized, stoking a lack of lawmaker calls for a European watchdog for the sector.
So the rules are already in effect?
Not now.
Formal rubberstamping is required by EU states and the European Parliament before the deal goes into effect – possibly at the earliest in 2023.
The rules will apply to certain tokens such as “stable coins” – crypto linked to traditional currencies or commodities intended to hold a stable value – 12 months from the day the law comes into force. For other tokens, the rules will apply 18 months after the start date.
Crypto firms that already comply with anti-money laundering controls will also be given 18 months to obtain a license under the new law, without disrupting service.
Are Stablecoins a Big Issue?
Pucca.
The May collapse of the TeraUSD stablecoin triggered a sharp sell-off in crypto markets and worried regulators.
EU regulations will give holders of stablecoins the right to claim their money for free. Token issuers will have to maintain a minimum level of liquidity, and will be overseen by the European Banking Authority of the European Union.
Crypto firms must have a registered office in the block to issue stablecoins, and coins based on non-European currencies will be constrained to maintain “monetary sovereignty”.
Crypto industry executives say that it will be difficult to earn money under such rules.
And non-fungible tokens?
this is complex. MPs wanted non-fungible tokens (NFTs) under the new rules, but EU states opposed it.
This led to a settlement where NFTs are not involved, but if they are changed – mutually replaceable – regulators can force them to comply with crypto regulations. If they act like traditional securities, the EU’s stringent MiFID market regulations could come into play.
The European Commission will assess within 18 months whether standalone regulations are needed for NFTs.
What about crypto and climate change?
Bitcoin’s energy use is a major concern for lawmakers.
Crypto firms must disclose their impact on the environment and climate change, using standards that the ESMA Securities Watchdog will draft.
The European Commission will assess the environmental impact of cryptocurrencies within two years and introduce mandatory sustainability regulations, which include an energy-intensive “proof of work” system used to “mining” crypto such as bitcoin.
What are other countries doing?
Japan made a mark among major economies in 2017 by introducing a crypto law, forcing exchanges to register with their financial watchdog.
Others have slowed down.
In the United States, there is no federal structure, although individual states have crypto-specific regulations. Senators this month unveiled a bill to set new rules and hand over greater oversight to commodities regulators, although it is unclear when the rules will be approved.
Britain said in April that it would introduce regulations on stablecoins, leaving most cryptocurrencies and related companies subject to only minor regulation.
read all breaking news, today’s fresh newswatch top videos And live TV Here.