EU Consent Rules for the ‘Wild West’ Crypto Market: What are the new rules and how will it affect the future?

The European Union on Thursday reached an interim agreement on the world’s first comprehensive set of rules to regulate what one lawmaker called the “Wild West” crypto market.

WHAT ARE THE NEW RULES?

Electronic money companies that want to issue and sell digital token in one EU The state will have to obtain a permit from the national regulator.

The license will allow miners to serve an entire block of 27 countries from one facility and be responsible for the loss of cryptocurrencies from consumers’ digital wallet.

Currently, companies show EU national regulators that they have sufficient control to prevent money laundering, but can only operate within that country.

National watchdogs must update the ESMA to the EU’s securities watchdog on any major operators they have authorized, which would prevent lawmakers from calling for a supervisory body. Europe for this area.

SO HAVE THE RULES WORKED?

Not yet.

The deal needs formal intervention by EU states and the European Parliament before it comes into force – possibly as early as 2023.

The rules will apply to some token As “stablecoins“- cryptocurrencies pegged to traditional currencies or commodities for the purpose of keeping a stable value – 12 months from the date of entry into force of the law. For other tokens, the rules will apply 18 months after the start date.

Cryptocurrency companies that already comply with anti-money laundering controls will also have 18 months to apply for a license under the new law without disrupting service.

IS STABILITY A HUGE PROBLEM?

Sure.

The fall in May of TerraUSD stablecoins caused a sharp sell-off in the crypto market and worried regulators.

European Union rules will allow stablecoin holders the right to claim their money back free of charge. Token issuers will have to have a minimum level of liquidity and will be overseen by the European Union’s European Banking Authority.

Cryptocurrency companies must have a registered office in the block to issue stablecoins, and coins based on non-European currencies will be restricted to maintain “monetary sovereignty”.

Cryptocurrency industry officials say it will become more difficult to make money under such rules.

AND TOKENS NOT FLEXIBLE?

It’s very complicated. Lawmakers want non-fungible token (NFT) under the new regulations, but the EU states objected.

That leads to a compromise in which NFTs are not included, but if they become interchangeable – interchangeably – then regulators can force them to comply with crypto rules. If they behave like traditional securities, the EU’s strict MiFID market rules could come into play.

The European Commission will assess within 18 months whether independent rules are needed for the NFT.

WHAT ABOUT CRYPTO AND CLIMATE CHANGE?

BitcoinEnergy use is a major concern for lawmakers.

Cryptocurrency companies will have to disclose their impact on the environment and climate changeusing standards that the securities watchdog ESMA will develop.

The European Commission will assess the environmental impact of cryptocurrencies within two years and introduce mandatory rules for sustainability, including an energy-intensive “proof-of-work” system. to “mine” cryptocurrencies like bitcoin.

WHAT ARE OTHER COUNTRIES DOING?

Japan created a trail among major economies by enacting crypto laws in 2017, forcing exchanges to register with its financial watchdog.

Others have been slower.

In the United States, no federal framework is in place, although individual states have crypto-specific rules. Senators announced this month a bill that aims to set new rules and give most of the oversight power to cargo regulators, though it’s unclear when the rules will be passed.

In April, Britain said it would introduce rules on stablecoins, leaving most cryptocurrencies and related companies only subject to patchwork.

© Thomson Reuters 2022