On Tuesday, the European Union’s sweeping, toughened cryptocurrency rules received final approval from member states, giving the 27-nation bloc a global lead in regulating the freewheeling sector.
The European Council approved the rules package – Markets in Crypto Assets (MiCA) – in the final step of the bloc’s legislative process. European Parliament lawmakers approved the rules in April, which are expected to take effect gradually starting in July 2024.
The tightened European controls follow a series of high-profile crypto scandals, including the collapse of trading firm FTX and the implosion of stablecoin TerraUSD.
The regulations are intended to improve transparency and combat money laundering. They also apply to stablecoins, typically tied to a hard currency or commodity such as gold, making them less volatile than regular cryptocurrencies.
Other digital tokens and bitcoin-related services such as trading platforms and digital wallets are also covered by the regulations, but not bitcoin itself.
“Recent events have confirmed that there is an urgent need to introduce rules that better protect Europeans who have invested in these assets and prevent the misuse of the crypto industry for money laundering and terrorist financing purposes,” said Swedish Finance Minister Elisabeth Svantesson, whose country holds the rotating presidency of the European Council.
Under MiCA, which has been in the works since 2020, crypto companies will need a license to operate in the EU and be held liable if they lose investors’ assets. Authorities will create a public list of “non-compliant” companies.
The rules, aimed at maintaining financial stability, include provisions to combat market manipulation and insider trading. Companies that issue or trade crypto-assets must disclose information about the risks, costs and fees that consumers face.
Large crypto companies will have to disclose how much energy they use. The enormous amount of energy used in Bitcoin mining to create new coins has fueled concerns about the carbon footprint of cryptocurrencies.
The U.S. has yet to progress in tightening oversight of cryptocurrencies and digital assets, while the U.K. is considering feedback on proposed crypto regulations unveiled last year.
Some European countries, such as Germany, already have basic crypto regulations.