The European Council Approves Crypto Regulation Bills – MiCA & TFR
CyberClaims’ crypto experts prepared an overview in regard to the current situation, so any crypto investor can be sure you are missing out on nothing. On October 10th, the European Parliament took a major step and voted in support of the comprehensive MiCA or Markets in Crypto Assets regulations bill. The European Parliament’s ECON and LIBE committees also approved the Transfer of Funds or TFR regulations. This comprehensive measure is taken to reduce fraud in the industry and make sure that the crypto market follows all necessary rules and procedures.
There have been many crypto scams and frauds worth millions of dollars, and the EU wants to tackle money laundering, empower consumer protection, and ensure that crypto companies are accountable. Both the TFR and MiCA bills have been discussed extensively in the global crypto scene, and there is the belief that many more regulations are bound to come up.
The MiCA and TFR Bills Tackle Many Issues
The MiCA aims to provide a new framework and set of rules for exchanges, brokers, trading platforms, token and stablecoin issuers inside the EU to operate under. The bill addresses a debate about whether to consider cryptocurrency as a commodity or security. MiCA divides crypto into – crypto assets, asset-referenced tokens, utility tokens, and e-money tokens. Every asset shall be regulated based on its classification.
Even though the bills are passed for Europe, they are likely to have a major effect on the worldwide crypto industry. The MiCA bill aims to tackle money laundering, and stablecoins, ensuring accountability among crypto firms, boost consumer protection, and boost environmental sustainability. The EBA will oversee stablecoins and has made it compulsory to maintain minimum liquidity by issuers to make sure major crashes don’t take place.
When it comes to money laundering, MiCA has asked the EBA to record a list of all crypto service providers that are non-compliant. Additional checks have been introduced to ensure anti-money laundering practices and rules are being followed.
The TFR or Transfer of Funds will implement the Travel Rule by FATF and makes it mandatory to record all information related to the sender and receiver during any crypto transaction. After the bills were proposed in June, they have received a positive vote by the Parliament in October.
The crypto market is embracing these rules and believes that regulators all over the world will soon follow suit. Crypto entities have 18 months to make changes and meet the obligations stated in MICA and TFR before the bills come into full effect in 2024.
Timeline for the Implementation of MiCA and TFR
The EU approved both bills on October 10, but there is still some time before the new regulations and framework are active. First of all, these need to happen before implementation –
- The EU Parliamentary Plenary’s final vote
- Translation of the bills into official languages of the EU
- Publication in the Official Journal
If everything goes according to plan, both the crypto regulation bills will be implemented in early 2023. After that, they are expected to follow the following timeline –
2024 Q1 – The stablecoin rules will come into effect one year after the passing of the bill. The issuing of any stablecoin will be done only after prior approval by the national authorities. Also, for every approved stablecoin, the issuer will have to make and publish whitepapers.
2024 Q3 – After 18 months of the bills’ passing, all other rules, including licensing and TFR, will come into effect. Therefore, all major entities still have lots of time to adjust to these changes and meet all necessary obligations and guidelines.
Tasks Needed to be Accomplished before the Crypto Regulations are Implemented
The European Parliament has voted in support of the MiCA and TFR bills, but their job is not finished yet. The EBA, ESMA, and other authorities still have to work hard, provide necessary resources, and develop certain things in order for the bills to be effective.
- Regulatory Technical Standards or level two text must be improved. This includes the information used in stablecoin or CASP applications, methodology for stablecoin issuers’ capital requirements calculation, trade requirements, complaints resolving, conflict of interests, reporting templates, transaction data, etc.
- Better supervisory procedures and rules, especially for ARTs issuers and EMT issuers by the EBA. National authorities and the EBA must follow a dual-supervision strategy for this.
- There should be safer and more confidential information exchange requirements among supervisors and issuers, both at a national or the European level.
- Better guidelines related to the classification of crypto assets, requirements to qualify for the management board, stablecoin redemption and recovery plans, etc.
Some Issues that Require Specifity
The Parliament reached a compromise during the last days of the crypto regulations negotiation regarding certain issues. Work needs to be done, and there should be more clarity regarding them.
Stablecoin cap – There is a restriction imposed on using stablecoins as means of exchange, based on the daily transaction value and an estimated quarter average number. The EBA needs to distinguish better between transactions for settlement or retail payments.
DeFi – All crypto services working without intermediaries in a decentralized way are excluded from the scope of MiCA. There are existing entities that may not meet all requirements and may have to adapt. It is possible that the EU will come up with new regulations for DeFi entities soon.
NFTs – Unique NFTs that aren’t associated with other assets do not fall under the MiCA’s scope. However, fractional parts of an NFT and tokens issued in a collection indicate fungibility. There should be a better definition of fungibility so that such NFTs comply with the new regulations.
The passing of the Markets in Crypto Assets and Transfer of Funds crypto regulations by the European Union is a major milestone and will go a long way in regulating the industry. Never before there were proper regulations in place like this, and the rest of the world is likely to follow this.
The bill will reduce the scams and frauds prevalent in the crypto market, boosting consumer protection and anti-money laundering. The new set of frameworks and regulations are expected to begin in the middle of 2024, and until then, entities have time to make adjustments based on the new rules.
Have questions? Contact CyberClaims for more information! We assist victims of fraud and potential crypto investors to make sure they are staying on the safe side while investing a sufficient amount of funds. We offer various services starting from due diligence to crypto tracing – anything that can help to tackle the fraud!