Europe takes the lead in regulating the cryptocurrency market. The European Parliament yesterday overwhelmingly approved the first rules to bring order to the sector by approving two regulations that aim to better protect consumers and shed light on the sector to fight against money laundering and terrorist financing .
The new regulation “marks the end of the era of the Wild West for crypto assets and the beginning of a new era of a safer and more regulated market”, celebrated the co-sponsor of one of the reports, Ernest Urtasun, MEP of En Comú Podem and Vice President of the Greens/ALE. “The lack of regulation has led to massive losses for many small investors and has provided a safe haven for fraudsters and international criminal networks,” Urtasun highlighted.
The United States and the United Kingdom are also finalizing their own regulations for this market, shaken in recent months by the bankruptcy of several crypto-asset firms, especially the collapse of FTX. “We are adopting safeguards that would prevent some of the companies active in the European market from carrying out some of the practices that led several crypto operators to go under,” said the European Commissioner for Financial Services, Mairead McGuinness, in the debate prior to the vote. . “Had FTX been under EU jurisdiction, many of its practices would not have been allowed,” she asserted.
The new regulation, which will force operators to make their carbon footprint public, consists of two rules. On the one hand, the regulation on transfer of funds (TFR), which imposes obligations on crypto asset service providers similar to those of traditional banks in terms of traceability of operations between portfolios of more than 1,000 euros. That is, the collection of data on the payers and beneficiaries of the transfers, the so-called travel rule, a crucial tool for tracking suspicious transactions.
Currently, transfers of virtual assets such as bitcoins are not subject to European rules on financial services. The new regulation, according to Urtasun, will be "the most ambitious flow control legislation in the world", since it offers "total traceability in crypto transfers from the first euro" and imposes obligations for crypto companies to "mitigate the risks of money laundering of capital and evasion of sanctions”.
The other pillar of the new regulation is the regulation on cryptoactive markets (MiCa), which obliges service providers of this type to register in an EU country in order to operate and places them under the umbrella of supervisory regulations. of the competent national authorities, as well as the European Securities and Markets Authority. From now on, companies will be obliged to provide information to consumers about the risks, costs and expenses of their operations.
But this is not the end of the road. Given the rapid evolution of the sector and the launch of new products such as tokens or crypto loans, the president of the European Central Bank, Christine Lagarde, has asked European legislators to prepare a new MiCA2 regulation now. For Elizabeth McCaul, a member of the Supervisory Board of the European Central Bank, the regulation should go further. "In accordance with the principle of proportionality," these service providers "should be subject to both stricter requirements and enhanced oversight: MiCA covers neither," McCaul lamented in a recent hearing.
On the other hand, some voices have criticized the long transposition period that is expected to be given to the industry, which will not have to comply with the regulations until July 2024, and January 2025 in certain cases. After the vote of the European Parliament, which approved the proposal by 529 votes in favour, 29 against and 14 abstentions, the texts will be voted on by the Council on May 18. Once published in the Official Gazette of the EU, there will be a transitory period of 18 months for operators to adapt to the new conditions. "There are 18 months in which consumers are not going to take any precautions," criticized MEP Aurore Lalucq, from the Social Democratic group.
McGuinness insisted that the regulation is not intended to do away with crypto assets (“they are absolutely vital to the financial system,” he insisted) but rather to better protect consumers, guarantee financial stability and prevent crime. “Although the crypto-asset market is still too small to trigger systemic risks, we also know that there are increasing links between these markets and traditional financial services,” she stressed. "I hope our standards become a model for other countries."
