The EU Approves The MiCA and TFR Crypto Regulation Bills
Even though the cryptocurrency industry has seen a major boom in the past few years, there are still a lot of scams and fraud cases popping up. Recently, the European Union took a major step and approved the extensive Markets in Crypto Assets or MiCA regulation bill to regulate the cryptocurrency market and its trading. Here at Scam Help we prepared an overview of new regulations, so you can be sure you are aware of what is going on in cryptocurrency regulations world.
This significant action by the Parliament’s Committee of Economic & Monetary Affairs will ensure that the market follows all rules and regulations and digital fraud is reduced. The lawmakers from the LIBE and ECON committees have also voted in support of the TFR or Transfer of Funds Regulation.
This bill can have a huge effect on the global crypto market and will directly address several things like consumer protection, the fight against money laundering, accountability of crypto-based companies, stablecoins, and even the industry’s environmental impact.
MiCA and TFR bills have sparked a hot debate in the industry, and many believe that it is the first of many wholesale changes in the global crypto industry. These cryptocurrency regulations by the EU could bring about a new era, and major entities have 18 months to adapt to the new guidelines before the bill comes into effect.
What are the MiCA & TFR Bills?
The MiCA bill is focused on bringing the crypto asset class under total supervision of the EBA and ESMA. The bill offers a new framework and guidelines for trading platforms, exchanges, custodians, brokers, and stablecoin or token issuers that operate inside the European Union.
MiCA covers disclosure requirements, licensing, sustainability guidelines, market abuse prevention, etc. Apart from this, it also oversees money laundering, stablecoins, and consumer protection. On the other hand, TFR or Transfer of Funds is passed to implement FATF’s Travel Rule. It makes it compulsory to identify the information of the receiver and the sender during crypto transactions.
All companies licensed or registered in Europe that deal in crypto assets and stablecoin providers must adapt to the implementation of the TFR and MiCA bills and meet all the necessary obligations.
When will Full Implementation of the Bills Take Place?
Before these bills come into effect, the European Parliament still has to take care of a few more things. The EU Parliament Plenary will conduct a final vote, after which the bills need to be translated into official European languages and, finally, the Official Journal publication.
If there are no future setbacks, the TFR and MiCA will enter the painting in the first quarter of 2023. However, this is not the time when the new rules and guidelines come into effect.
In the first quarter of 2024, one year after the bills are passed, the stablecoin rules will be effective. Before issuing any stablecoin, issuers will have to take permission from the national authorities, and create and publish the whitepapers for all approved stablecoins. They also need to meet compliance requirements related to market communications, conduct, liquidity, etc.
The stablecoins included within the TFR and MiCA bills include asset-referenced tokens and e-money tokens. After this, in the third quarter of 2024, 18 months after the bills are passed, ever rule, including the TFR, will come into effect.
Steps the EU Needs to Take Before the Bills Pass
Even though the European Parliament has voted in support of the TFR and MiCA regulation bills, there are still certain things that need to be taken care of. Particularly, the European Securities and Markets Authority and the European Banking Authority have to work with the same speed and effort, and ensure sufficient resources for the success of these bills.
Here are certain things that they still need to develop –
RTS or Regulatory Technical Standards – This is also called level two text. This includes the information that has to be entered in a stablecoin authorization or CASP application, methodology used to calculate stablecoin issuers’ capital requirements, pre, and post-trade transparency needs, white paper disclosures, conflict of interest, handling of complaints, standard report templates, etc.
Supervisory procedure and policies – National competent authorities and the EBA must start a dual-supervision model to supervise ART and significant EMT issuers.
Guidelines – They must issue guidelines related to stablecoin recovery, redemption plans, criteria to classify crypto assets as either crypto assets or financial instruments, management board requirements, etc.
Information and data exchange – The need to develop exchange requirements between supervisors and issuers, and among European and national level supervisors.
The following are some issues regarding which the EU compromised at the very last moment. These matters will also need to be further specified for the effectiveness of the TFR and MiCA bills.
NFTs – MiCA states that the NFTs, including collectibles and digital art, do not fall under its scope if they are unique and non fungible with any other crypto assets. However, tokens issued in a collection or big series, or fractional parts of an NFT indicate their fungibility. There should be clarity regarding fungibility, and NFTs that match this definition should comply with the TFR and MiCA.
Cap on stablecoins – The restrictions imposed on stablecoin issuing is to be based on a quarterly average number and the daily transaction value in a uniform currency region. The bill states that ARTs will have a 1 million transaction cap while non-Euro EMTs will have a 200 million cap every day. The cap doesn’t apply to stablecoins for spot trading transactions. However, the EBA needs to distinguish better between settlement and retail payment transactions for this.
DeFi – The final bills do not include fully decentralized crypto assets currently, and it needs to be seen which of the current DeFi protocols will be included in this. The EU is also working on the development and regulation of Defi services and could soon launch new rules and guidelines.
Cryptocurrency is a large industry now, and with TFR and MiCA, the European Union wants to provide a uniform and safe crypto framework across the continent. The bills aim to bring in regulations that offer consumer protection, conduct of business, market abuse prevention and help in the fight against illicit trade and frauds.
As the guidelines and standards in the MiCA and TFR continue to develop, crypto service providers and asset holders will have better clarity regarding crypto operations in the EU. If everything goes t plan, these comprehensive bills will act as a benchmark for the rest of the world.
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