Europe is set to lead the world in regulating the liberal crypto industry at a time when prices are plunging, wiping out fortunes, fueling skepticism and sparking calls for scrutiny. closer.
The European Union took its first step late Wednesday by agreeing on new rules that make cryptocurrency transfers subject to the same money laundering rules as traditional bank transfers.
A much larger move is expected when EU negotiators deliver final details late on Thursday on a separate deal for a package of crypto regulations for its 27 countries. block, known as the Crypto Asset Marketplace, or MiCA.
Patrick Hansen, a crypto advisor at Presight Capital, a venture capital firm, said the EU rules are “really the first comprehensive piece of crypto regulation in the world”.
“I think a lot of jurisdictions will be looking closely at how the EU has dealt with this issue since the EU was first here,” Hansen said.
He hopes authorities elsewhere, especially smaller countries that don’t have the resources to craft their own rules from scratch, will adopt those similar to those of the EU, though.” they can change a few details.”
Under the regulation of the Market in Crypto Assets, exchanges, brokers, and other crypto companies face strict regulations aimed at protecting consumers.
Companies that issue or trade crypto-assets like stablecoins — often pegged to the dollar or a commodity like gold making them less volatile than conventional cryptocurrencies — face requirements strict transparency requirements, requiring them to provide detailed information about the risks, costs and fees faced by consumers.
Bitcoin-related service providers will follow the regulations, but not bitcoin itself, the world’s most popular cryptocurrency, which has lost more than 70% of its value since its November peak.
European rules aimed at maintaining financial stability – a growing concern for regulators amid a recent spate of crypto-related crashes. Stablecoin TerraUSD exploded last month, wiping out an estimated $40 billion in investors’ funds with little or no accountability.
The crises have prompted calls for regulation, with other major jurisdictions still mapping out their strategies. In the US, President Joe Biden issued an executive order in March on government oversight of cryptocurrencies, including research on the impact on financial stability and national security.
Last month, California became the first state to officially begin examining how to broadly adapt to cryptocurrencies, with plans to work with the federal government on manual regulations.
The UK has also revealed plans to regulate several cryptocurrencies.
Some European countries, like Germany, already have basic cryptocurrency regulations. One of the EU’s goals is to come up with rules that are consistent with the bloc, so that a crypto company based in one country can offer services in other member states.
EU rules, which still need final approval and are expected to come into force in 2024, include measures to prevent market manipulation, money laundering, terrorist financing and criminal activities other offenses.
On Wednesday, European Union negotiators signed an interim agreement for the bloc’s first rules on tracing transfers of crypto assets such as bitcoin, aimed at curbing transactions. illegal and block suspicious transactions.
When a crypto asset changes hands, information about both the source and the beneficiaries will have to be stored on both sides of the transfer process, according to the new rules. Cryptocurrency companies will have to turn over this information to authorities investigating criminal activity such as money laundering or terrorist financing.
“For too long, crypto assets have been on the radar of our law enforcement agencies,” said Assita Kanko, one of the top EU lawmakers negotiating the rules. “It will be much harder to abuse crypto assets and innocent investors and traders will be better protected.”
EU institutions are working out the technical details before the crypto tracing rules receive final approval.