The European Parliament has given the green light to the world’s first comprehensive set of rules designed to regulate the cryptocurrency industry. With 517 votes in favor and 38 against, the Markets in Crypto Act (MiCA) has been passed. This legislation aims to mitigate risks for consumers purchasing cryptocurrencies by holding providers accountable for any loss of investors’ crypto-assets.
MiCA imposes a range of requirements on crypto platforms, token issuers, and traders related to transparency, disclosure, authorization, and transaction supervision. It obliges platforms to inform consumers about the associated risks and regulates the sale of new tokens. Furthermore, stablecoins like tether and Circle’s USDC must maintain sufficient reserves to meet redemption requests during mass withdrawals. Those that become too large face a daily transaction limit of 200 million euros ($220 million).
The European Securities and Markets Authority (ESMA) will have the authority to ban or restrict crypto platforms that fail to adequately protect investors or threaten market integrity or financial stability.
MiCA also addresses environmental concerns by requiring firms to disclose their energy consumption and the environmental impact of digital assets.
Mairead McGuinness, European commissioner for financial services, expects the rules to begin applying “from next year.”
Andrew Whitworth, EMEA policy director for Ripple, hailed this development as “an important milestone for the crypto industry around the world,” emphasizing the need for consistent implementation and proportional application based on companies’ risk profiles.
The European Parliament has also passed the Transfer of Funds regulation, which applies the “travel rule” to crypto transactions. Financial companies must screen, record, and communicate information on both the sender and recipient to combat money laundering. Transfers between exchanges and self-hosted wallets exceeding 1,000 euros must be reported.
This puts the EU ahead of the U.S. and U.K., which have yet to enact formal crypto regulations. Once these EU laws take effect, crypto firms can use their licenses from one European country to offer services across various member states.
Coinbase and Kraken have recently obtained virtual asset service provider licenses in Dublin, and Ripple is seeking a license from the Irish central bank. U.S. crypto companies have been exploring expansion opportunities abroad in response to increasing regulatory challenges at home. Coinbase CEO Brian Armstrong even mentioned the possibility of relocating from the U.S. due to the lack of regulatory clarity.