How EU’s new MiCA law affects crypto’s ‘wild west’

On June 30, the European Parliament agreed upon a new law to regulate cryptocurrencies in the bloc. The markets in crypto-assets (MiCA) law is being the first comprehensive regulation for the industry, and some expect it to become a GDPR-like law for cryptos worldwide. Mint explains:

What is the MiCA law?

The MiCA law seeks to address key concerns of regulators like money laundering, protection of consumers and investors, accountability of crypto firms, stablecoins and environmental footprint of cryptocurrency mining. Stefan Berger, one of the key lawmakers instrumental in the formation of MiCA, said that the law would regulate the “wild west” of crypto assets and provide legal certainty for those issuing crypto assets, while ensuring “high standards” for investors and consumers. It also excludes NFTs from its scope, but the EU may make a horizontal legislation for this sector in 18 months, after a separate assessment from the European Commission (EC).

How does MiCA regulate stablecoins?

The efficacy of stablecoins, which claim to be less volatile that other cryptos, has come into question after the unforeseen crash of Terraform Labs’ Luna token in May. With MiCA, the EU is mandating that stablecoin issuers have to maintain minimum liquidity to provide for sudden large withdrawals by users, and the reserves must also be protected from insolvency. The European Banking Authority (EBA) has been brought into the fold to supervise stablecoins, and asks stablecoin issuers to provide free of charge claims to investors. In addition, large coins which are used as a means of payment will be capped to €200 million worth of transactions per day.

How does it address environmental concerns?

Under MiCA, companies in the crypto industry will be required to declare their environmental and climate footprint. The European Securities and Markets Authority (ESMA) will develop draft regulatory technical standards on methodologies, content and presentation of such information. The EC will also have to provide a report on the impact of crypto assets on the environment, and introduction of mandatory minimum sustainability standards for mining mechanisms, especially the proof-of-work system, which has concerned industry watchers for a long time now. This system increases the overall computing power going into mining, which in turn increases energy consumption.
Read the full story on Mint.