EU Parliament Takes a Stance on Cryptocurrency Regulation

28 July 2023

The EU parliament has recently given its seal of approval to a new legislation concerning the regulation of cryptocurrency. The main objective behind this legislation is to ensure the traceability of crypto asset transfers and the prevention of suspicious transactions. Moreover, it has also sanctioned common rules for the supervision, consumer protection, and environmental safeguards of crypto assets, known as MiCA.

In this article, we delve into the implications of these momentous changes for crypto asset users, shedding light on the new EU legislations and how we can assist you in managing these changes effectively.

EU law to trace crypto assets transfers and prevent money laundering.

Under this legislation, transfers involving crypto assets like bitcoins and electronic money tokens will undergo thorough tracing, while any suspicious transactions will be promptly halted. Significantly, this framework extends the concept of the “travel rule” from traditional finance to the realm of crypto finance, necessitating the inclusion of source and recipient information alongside each transaction.

According to the new legislation, transactions surpassing €1000 from “self-hosted” crypto wallets (private user-owned addresses) interacting with hosted wallets managed by crypto asset service providers will fall under its scope. However, person-to-person transfers conducted without a provider, as well as transfers between providers acting independently, will remain exempt from these regulations.

What does MiCA cover?

The EU parliament has granted its endorsement to an influential set of regulations, known as The Markets in Cryptoassets (MiCA) Regulation, set to take effect between mid-2024 and early 2025. MiCA aims to address the supervision of crypto assets while safeguarding consumers and the environment.

This regulation seeks to fill the gaps in the existing financial services legislation by bringing under its purview crypto assets that currently lack comprehensive regulation. MiCA focuses on enhancing transparency, disclosure, authorization, and transaction supervision, thus empowering customers with a deeper understanding of the costs and risks associated with cryptocurrencies. Furthermore, this progressive framework establishes controls on public offers of crypto assets, nurturing market integrity and fostering financial stability.

In addition, the legislation will put measures in place to prevent market manipulation, money laundering, terrorist financing and other financial crimes. To ensure compliance, the European Securities and Market Authorities (ESMA) will establish a public register, naming unauthorised crypto asset service providers operating within the EU. This initiative aims to curb illegal activities and foster a more secure ecosystem.

Recognizing the environmental implications of cryptocurrency mining, the legislation takes an additional stride towards sustainability. Major service providers will be legally bound to disclose their energy consumption, thereby promoting transparency and actively reducing the carbon emissions associated with crypto mining.

How AE Business Advisors Can Help

At AE Business Advisors, we understand that the evolving EU legislation surrounding crypto assets can be complex and overwhelming. That’s why we are here to provide you with the expertise and guidance you need to navigate these transformative changes seamlessly.

Our team possesses in-depth knowledge of the latest developments in the crypto finance sector, as well as their intricate interplay with national and international laws. Whether you are already utilizing crypto assets in your business or considering their integration in the future, we are equipped to help you comprehend and adapt to the regulatory landscape.

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Michael Spiteri Bailey