Hong Kong News

Nonpartisan, Noncommercial, unconstrained.
Wednesday, Feb 08, 2023

EU agrees on landmark rules to tame 'Wild West' crypto market

EU agrees on landmark rules to tame 'Wild West' crypto market

The rules aim to better protect consumers from wild swings in cryptocurrencies and require more transparency on the industry’s environmental impact.

The European Union has agreed on landmark rules for regulating the cryptocurrency industry, whose meltdown has been wiping out fortunes and sparking calls for tighter scrutiny worldwide.

EU negotiators hammered out the final details for a provisional agreement late on Thursday on a sweeping package of crypto regulations for the bloc’s 27 nations, known as Markets in Crypto Assets, or MiCA.

"Today, we put order in the Wild West of crypto assets and set clear rules for a harmonised market,” said Stefan Berger, the lead lawmaker negotiating the rules.

The EU's crypto rules "will ensure a harmonised market, provide legal certainty for crypto-asset issuers, guarantee a level playing field for service providers and ensure high standards for consumer protection," he said in a statement.

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, while meeting capital and consumer protection rules.

Like the EU’s trendsetting data privacy policy, which became the de facto global standard, and its recent landmark law targeting harmful content on digital platforms, the crypto regulations are expected to be highly influential worldwide.

The EU rules are "really the first comprehensive piece of crypto regulation in the world," said Patrick Hansen, crypto venture adviser at Presight Capital, a venture capital fund.

"I think there will be a lot of jurisdictions that will look closely into how the EU has dealt with it since the EU is first here," Hansen said.

He expected authorities in other places, especially smaller countries that don’t have the resources to draw up their own rules from scratch, to adopt ones similar to the EU’s, though "they might change a few details".


Protecting novice crypto investors


Under the Markets in Crypto Assets regulations, exchanges, brokers and other crypto companies face strict rules aimed at protecting consumers.

Companies issuing or trading crypto assets such as stablecoins - which are usually tied to the dollar or a commodity like gold that make them less volatile than normal cryptocurrencies - face tough transparency requirements requiring them to provide detailed information on the risks, costs and charges that consumers face.

The rules will help novice crypto investors avoid falling victim to frauds and scams that regulators have warned are widespread in the industry.

"That’s a huge benefit in this space, especially for someone who has absolutely no idea where to go to or who to seek out or where to put my money into," said Jackson Mueller, director of policy and government affairs at Securrency, a blockchain infrastructure company.

Providers of Bitcoin-related services would fall under the regulations, but not Bitcoin itself, the world's most popular cryptocurrency that has lost more than 70 per cent of its value from its November peak.


Addressing crypto's carbon footprint


To address concerns about the carbon footprint left by Bitcoin mining, which guzzles massive amounts of electricity for “proof of work” computer processing to record and secure transactions, crypto companies will have to disclose their energy use and prominently display information online about their environmental and climate impact.

Negotiators exempted NFTs, or non-fungible tokens, which have boomed over the past year.

The EU said that unlike cryptocurrencies, the digital assets, which can represent artwork, sports memorabilia or anything else that can be digitised, are unique and sold at a fixed price. But it left room to reclassify them later as a crypto asset under MiCA or as a financial instrument.

The European rules are aimed at maintaining financial stability - a growing concern for regulators amid a string of recent crypto-related crashes. For example, the stablecoin TerraUSD imploded last month, erasing an estimated $40 billion (€38.2 billion) in investor funds with little or no accountability.

The meltdowns have spurred calls for regulation, with other major jurisdictions still drawing up their strategies. In the US, President Joe Biden issued an executive order in March on government oversight of cryptocurrency, including studying the impact on financial stability and national security.

Last month, California became the first state to formally begin examining how to broadly adapt to cryptocurrency, with plans to work with the federal government on crafting regulations.

The UK also has unveiled plans to regulate some cryptocurrencies.

A few European countries, like Germany, already have basic crypto regulations. One of the EU’s goals is bringing rules in line across the bloc, so that a crypto company licensed in one country would be able to offer services in other member states.

The EU rules, which would still need final approval and are expected to take effect by 2024, include measures to prevent market manipulation, money laundering, terrorist financing and other criminal activities.

The EU also provisionally agreed on Wednesday on new rules subjecting cryptocurrency transfers to the same money-laundering rules as traditional banking transfers.

When a crypto asset changes hands, information on both the source and the beneficiary would have to be stored on both sides of the transfer, according to the new rules. Crypto companies would have to hand this information over to authorities investigating criminal activity such as money laundering or terrorist financing.

The EU institutions are working out the technical details before the crypto tracing rules receive final approval.

Newsletter

Related Articles

Hong Kong News
Close
0:00
0:00
2 earthquakes in Turkey killed over 2,300 people
Powerful Earthquake Strikes Turkey and Syria, Killing More Than 1,300 People.
Turkish photographer Ugur Gallenkus portrays two different worlds within a single image. Brilliant work
Charlie Munger, calls for a ban on cryptocurrencies in the US, following China's lead
Hong Kong airlines taking bold action after the years of pandemic lockdown and travel restrictions, to make Hong Kong great again
EU found a way to use frozen Russian funds
First generation unopened iPhone set to fetch more than $50,000 at auction.
WARNING GRAPHIC CONTENT - US Memphis Police murdering innocent Tyre Nichols
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
Chinese search giant Baidu to launch ChatGPT like AI chatbot.
What is ChatGPT?
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
China is opening up for foreign investors.
Tesla reported record profits and record revenues for 2022
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
China's foreign ministry branch in Hong Kong urges British gov't to stop the biased and double standards Hong Kong report
China relaxes 'red lines' on property sector borrowing in policy pivot
Tesla slashes prices globally by as much as 20 percent
Japan prosecutors indict man for ex-PM Shinzo Abe murder
Vietnam removes two deputy PMs amid anti-corruption campaign
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
China’s recovery could add 1% to Australia’s GDP: JPMorgan 
Saudi Arabia set to overtake India as fastest-growing major economy this year 
China vows to strengthen financial support for enterprises: official
International medical experts speak out against COVID-19 restrictions on China
2 Billion People To Travel In China's "Great Migration" Over Next 40 Days
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
Flight constraints expected to weigh on China travel rebound
Billionaire Jack Ma relinquishes control of Ant Group
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
Teslas now over 40% cheaper in China than US
TikTok CEO Plans to Meet European Union Regulators
UK chaos: Hong Kong emigrants duped by false prospectus
China seeks course correction in US ties but will fight ‘all forms of hegemony’, top diplomat Wang Yi says
China will boost spending in 2023
African traders welcome end of China’s Covid travel curbs
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
×