LONDON: Cryptocurrency companies will need a license and customer safeguards to issue and sell digital tokens in the European Union under groundbreaking new rules agreed by the bloc to tame a volatile “Wild West” market.
Globally, crypto assets are largely unregulated, with national operators in the EU only required to show controls for combating money laundering.
Representatives from the European Parliament and EU states thrashed out a deal late on Thursday on its Markets in Crypto-assets (MiCA) law.
“Today we put order in the Wild West of crypto assets and set clear rules for a harmonised market,” said Stefan Berger, a centre-right lawmaker who led negotiations on behalf of the parliament.
“The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act,” Berger said.
Crypto markets have tumbled this year, pressured by the collapse of the terraUSD stablecoin and major U.S. crypto lender Celsius Network freezing withdrawals and transfers.
Bitcoin, the biggest token, has slumped some 70% since its November record of $69,000, dragging down the overall market.
PROTECTING CONSUMERS
The landmark regulation confirms the EU’s role as a standard-setter for digital issues, EU states said.
“With the new rules, crypto-asset service providers will have to respect strong requirements to protect consumers’ wallets and become liable in case they lose investors’ crypto-assets,” they added.
The deal will need formal rubberstamping by the European Parliament and EU states to become law, followed by an implementation period.
The new law gives issuers of crypto assets and providers of related services a “passport” to serve clients across the EU from a single base.
Holders of stablecoins – a type of crypto designed to hold a steady value – will be offered a claim at any time and free of charge by the issuer, with all stablecoins supervised by the bloc’s banking watchdog EBA.
Robert Kopitsch, secretary general of the Blockchain for Europe lobby group that includes the major exchanges Binance and Crypto.com, said the rules were “a mixed bag”.
“Thanks to last-minute changes, we also fear that stablecoins will basically have no ways to be profitable,” Kopitsch said.
AFME, a financial markets industry body, said the rules would bring certainty, reduce fragmentation and underpin the development of a robust and well-functioning market.
More clarity is needed, however, to ensure that custodians of crypto assets are only on the hook in cases of negligence or misconduct, and not for events beyond a custodian’s control, such as a nation state hack, AFME said.
