EU Crypto Regulation European Parliament Approves MiCA and TFR Law
On April 20th, 2023, the European Union Parliament voted and adopted two significant proposals. One is for regulating markets dealing with cryptocurrency, known as MiCA. The other proposal, called Accompanying Regulation, aims to trace transfers of crypto-assets by requiring specific information when funds are moved. Switzerland crypto companies trading with EU members must familiarize themselves with the new regulations to continue trading in the EU.
The European Union can now regulate the cryptocurrency industry in their battle against money laundering and terrorism financing, thanks to the long-awaited MiCA Law's approval. Lawmakers voted 517-38 in favor of the law, which had been delayed for a considerable period. Although MiCA rules address a wide range of unregulated cryptocurrency assets, they do not provide comprehensive coverage. Notably, assets like non-fungible tokens (NFTs) and Decentralized Finance (DeFi) are exempt from these rules. Also, the regulation of lending and borrowing in crypto-assets falls outside the scope of MiCA and is still subject to relevant national laws.
The Council of the EU will have the final vote on the bill on May 16, and once approved, it will be published in the Official Journal of the European Union and take effect in July. Crypto companies will be given a window of one to two years to comply. The amended Travel Rule will be enforced by the EU from January 2025. Crypto companies from Switzerland and other countries that are not EU member states will have to adhere to the regulations if they transact their businesses in the EU.
The "travel rule" currently used in traditional finance will apply to transfers of crypto assets in the future through the Accompanying Regulation. As such, details about the asset's source and beneficiary must accompany the transaction and be stored on both sides of the transfer.
An Insight Into What MiCa Will Do
- Create a harmonized framework for crypto assets not covered by existing EU and Luxembourg legal frameworks.
- Replace existing national frameworks and establish uniform rules for crypto-assets across the EU
- Establish uniform requirements for transparency and disclosure related to the issuance, operation, organization, and governance of crypto-asset service providers
- Establish consumer protection rules and measures to prevent market abuse
- Regulate crypto-assets that do not qualify as financial instruments, deposits, or structured deposits under EU financial services legislation
- Set out the terms and definitions of the referenced crypto-assets
The new law could provide a chance to shift crypto focus from scams and unrealistic promises towards real economic benefits. This is a positive development for the crypto industry, which has been through a difficult period.
MiCA, in conclusion, establishes a market abuse framework that builds upon the conventional restrictions against illicit exposure of confidential information, insider trading, and market exploitation.