What Are the New Rules and How Will It Affect the Future? The European Commission has agreed to a rulebook for Wild West Crypto Markets

What Are the New Rules and How Will It Affect the Future? The European Commission has agreed to a ru ...

The European Union signed a provisional agreement on the world's first set of comprehensive rules to regulate what one legislator has dubbed the Wild West crypto market on Thursday.

WHAT ARE THE NEW CONCERNS?

Crypto businesses that want to sell and issue digital tokens in an EU will have to obtain a license from a national authority.

Operators will be able to serve the whole 27-country bloc from one base, and be held liable for losing cryptocurrencyassets from consumers digital wallets as a result of the license.

Currently, businesses show an EU national regulator that they have adequate measures to combat money laundering, but that they can only operate within that country.

National watchdogs must notify the EU's securities regulator ESMA of any large enterprises they have approved, which falls short of legislator calls for a European watchdog for the sector.

SO THE RULES ARE ALREADY IN EFFECT?

Not yet.

Before it can go into force, the agreement will require formal backing from EU governments and the European Parliament. It will take place in 2023, at the earliest.

The rules will apply to certain tokens, such as stablecoins, which are relegated to traditional currencies or commodities, that aim to maintain a steady value twelve months from the date the legislation comes into force. For other tokens, the regulations will apply 18 months after the initial date.

Crypto firms that have already met anti-money laundering requirements will be given 18 months to obtain licenses under the new law, without disrupting service.

Is it true?

The TerraUSD stablecoin's dissolution in May triggered a sharp sell-off in cryptocurrency markets and concerned regulators.

The European Banking Authority will oversee stablecoin holders and grant them the right to return their money for free. Issuers of the tokens will have to demonstrate minimum liquidity requirements.

Stablecoins must be issued by cryptocurrency companies in the bloc, and non-European coins will be compelled to maintain monetary sovereignty.

Officials from the crypto industry anticipate that it will become more difficult to make money under such restrictions.

It's complicated. Under the new rules, legislators desired non-fungible tokens (NFTs), but EU governments vetoed them.

NFTs are not included in the deal, but if they become fungible mutually replaceable regulators may impose requirements. If they act like traditional securities, the EU's strict MiFID markets regulations may apply.

Within 18 months, the European Commission will investigate whether or not separate procedures are required for NFTs.

Legislators are concerned about bitcoins' energy consumption.

The ESMA securities watchdog will outline cryptocurrency companies' impact on the environment and climate changeusing guidelines.

Within two years, the European Commission will assess the environmental impact of cryptoassets and adopt mandatory sustainability regulations, including for the energy-intensive proof of work system used for mining cryptocurrency such as bitcoin.

Japan established a cryptocurrency standard in 2017, forcing exchanges to register with the financial watchdog.

Others have travelled slower.

Although individual states may have crypto-specific regulations, there is no federal framework in place in the United States. Senators unveiled this month a measure to establish new standards and hand the bulk of oversight to commodities regulators, although it's unclear when the provisions will be adopted.

The United Kingdom announced in April that it would introduce restrictions on stablecoins, leaving the majority of cryptocurrencies and related businesses subject to patchy regulation.

2022 Thomson Reuters

You may also like: