Diplomats representing the 27 countries of the European Union (EU) have agreed on a draft regulation document containing rules to govern cryptocurrency businesses in the region.
The rules are referred to as ‘Markets in Crypto Assets Regulation (MiCA),’ and if approved by the European parliament, will introduce a licensing regime for crypto services, including wallet providers and exchanges across all nations.
In July 2022, French Finance and Economy Minister, Bruno Le Maire, described MICA as a landmark regulation that will put an end to the crypto wild west and confirm the EU’s role as a standard-setter for digital topics.
The Council of the European Union (EU) Draft proposal on regulating crypto assets pic.twitter.com/9dbUQV1XxI
— BitKE (@BitcoinKE) October 9, 2022
In the draft, crypto-asset service providers will have to respect strong requirements to protect consumers’ wallets and become liable in case they lose investors’ crypto-assets. These businesses will also need authorization in order to operate within the EU.
Any marketing communications relating to an offer to the public of asset-referenced tokens to trade shall clearly indicate the address of the website of the issuer of the crypto-assets, as well as an email address and a telephone number of the issuer.
— BitKE (@BitcoinKE) October 9, 2022
Moreover, MiCA will be introduced alongside a requirement for wallet providers to check their customers’ identities, in a bid to cut money laundering.
At the same time, token issuers will be required to resolve any customer complaints in a timely manner.
Issuers of asset-referenced tokens shall develop and make available to clients a template for filing complaints and shall keep a record of all complaints received and any measures taken in response thereof.
— BitKE (@BitcoinKE) October 9, 2022
It is also expected that the European Banking Authority (EBA) will supervise stablecoins, with the presence of the issuer in the EU being a precondition for any issuance.
Issuers of asset-referenced tokens shall in a clear, accurate and transparent manner disclose, on their website the amount of asset-referenced tokens in circulation, and the value and the composition of the reserve assets. Such information shall be updated at least once a month.
— BitKE (@BitcoinKE) October 9, 2022
The investment of reserve assets, including any associated risks will be the responsibility of the token issuer.
Asset-referenced tokens issuers that invest a part of the reserve assets shall only invest in highly liquid financial instruments with minimal market risk, credit risk and concentration risk. The investments should be easily, rapidly liquidated with minimal adverse price effect
— BitKE (@BitcoinKE) October 9, 2022
Regular audits by independent auditors will also be mandated for token issuers within the EU.
Issuers of asset-referenced tokens shall ensure that they are regularly audited by independent auditors. The results of those audits shall be communicated to the management body of the issuer concerned and made available to the competent authority.
— BitKE (@BitcoinKE) October 9, 2022
Token holders will also have the right and ability to liquidate their assets at any time.
Upon request by the holder of asset-referend tokens, the respective issuer must redeem at any moment by paying in funds other than e-money the market value of the asset-referenced tokens held or by delivering the referenced assets.
— BitKE (@BitcoinKE) October 9, 2022
The stablecoins will also come under strict requirements. The draft rules include a mandate for authorities to make stipulations to stablecoin issuers concerning reserve liquidity. It is expected these will entail provisions on minimum liquidity.
Check out the full regulation draft here.
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