EU cryptocurrency regulations are about to be finalized!

Patrick Hansen, Presight Capital's Crypto Venture Advisor, shared updates on EU plans regarding the two necessary cryptocurrency regulations (MiCA and TFR). According to media reports, the Markets in Crypto Assets (MiCA) regulation aims to ban dust-related cryptocurrency mining operations. The second is the regulation on the transfer of funds (TFR), aimed mainly at “non-hosted portfolios”.

The three main EU institutions (Commission, Council and Parliament) will meet today to make the final updates to the famous MiCA bill. Although most of the major issues have been discussed, few still remain. It has not yet been discussed whether NFTs will be excluded from the scope of the MiCA.

The Commission wants the scope of the MiCA to include NFTs to protect consumers. However, the Council and the Parliament appear to have accepted after having objected. According to Hansen, the most likely outcome would be an exemption for NFT issuers.

However, the updated regulation will not exempt companies (such as NFT markets and platforms) and third party NFT service providers. High-volume operators will need a CASP license, while low-volume ones will not.

Stablecoin and the environmental impact of cryptocurrencies

The essential aspects of stablecoins are closed. Some of the conclusions include the absence of CASP interests on stablecoins and in-depth regulatory prerequisites for issuers of e-money tokens (EMTs) and asset-referenced tokens (ARTs).

The MiCA will also allow EU authorities to decide whether to ban the issuance of stablecoins (non-euro ART and EMT) for large-scale payments. The issues still to be discussed are the technical details of the significant stablecoins.

In addition, the details of the supervisory architecture will be discussed. Would it be the national crime agency (NCA) or other European supervisory authorities such as the EBA and EBSMA? After lengthy discussions, the scope of the MiCA will not cover the decentralized finance (DeFi) space.

The Commission will publish a new report on this next year. In addition, it will create a dedicated pilot project for a new form of oversight of “Embedded DeFi”. As for the environmental effect of cryptocurrencies, the Bitcoin ban is no longer up for discussion.

However, CASPs will require detailed disclosure. ESMA will provide requirements for each crypto asset for which they provide services. For example, the ETH (find out here the quotation in real time). Anti-money laundering provisions will be discussed. The aspects covered by the MiCA and those covered by TFR and AMLD (Anti-Money Laundering Directive).

Other topics to be discussed on Thursday include implementation periods, the exact supervisory framework and details on other previous issues. The parties are convinced that all negotiations can be concluded by the end of the month. Thereafter, they will formally vote on the compromise adopted during the plenary session of Parliament before the MiCA becomes law.

Negotiations on severance pay

Hansen said the severance pay negotiations could take longer because they are currently controversial. However, some conclusions have already been reached. The scope of the TFR will not cover p2p transfers (wallet <> wallet). Additionally, all cryptocurrency transfers will fall under the severance pay. But there will no longer be a ceiling of 1.000 euros for the application of these anti-money laundering rules.

Verification of unhosted wallets is one of the controversial issues. Parliament wants CASPs to identify other non-hosted portfolios. However, the Council and the Commission disagree. Both cite economic and anti-money laundering reasons for their decision.

The Council made an alternative suggestion. It suggests that CASPs address AML risk based on blockchain analysis. Then, use the results to take further mitigation measures. These two EU cryptocurrency regulation policies are important to the market because they are likely to set a precedent for cryptocurrency regulation in other regions.