European Parliament Approves MiCA Regulation for Crypto Regulation

On Thursday (20.4.2023), the European Parliament officially approved the MiCA (Markets in Crypto Assets) regulation, which introduces the regulation of cryptocurrencies. This regulation allows central banks to license cryptocurrency businesses and ensure the security and fairness of such services.

Until now, cryptocurrencies have been regarded as unregulated risk assets that financial institutions tend to avoid. When the MiCA regulation comes into force, a significant change and possible entry of banking players into this sector are expected. Existing crypto companies will have to apply for a license to operate and demonstrate not only capital readiness but also strict adherence to prudential principles.

As MiCA will cover the regulation of cryptoassets that have not been regulated so far, several new rules and principles will result. In particular, the most important rules will apply to entities that issue and trade cryptoassets (including reference asset tokens and e-money tokens). These entities will be obliged to implement new procedures and rules to increase transparency, disclosure of documents, authorisation or oversight of transactions. In regards to transparency, they will have to disclose all relevant information more clearly so that consumers are accurately and unambiguously informed about the risks, costs or fees associated with their operation.

Furthermore, the new legal framework will promote market integrity and financial stability by regulating public offerings of cryptoassets, where cryptoasset issuers will face much higher disclosure standards, including the obligation to publish a so-called Whitepaper (a document describing the technological and economic characteristics) for each asset. Issuers of stablecoins will also be subject to strict rules, for example, having to demonstrate that they hold sufficient and liquid reserves to back the stablecoin issued.

The approved text of the regulatory framework also contains various measures against market manipulation, money laundering, financing terrorism and other criminal activities. To combat the risks of money laundering, the European Securities and Markets Authority (ESMA) should establish a public register for non-compliant cryptocurrency service providers operating in the European Union without authorisation.

“The main benefit to the public is in clearly distinguishing fair trading companies and cleaning up the market from fraudsters. I also see room for better cooperation with financial institutions, which on the one hand, can start using the cryptocurrency infrastructure and, on the other hand, can also better provide payment services to companies in this sector,” said Juraj Forgács, CEO of Fumbi. According to Forgács, this means that crypto will become a standard form of asset, and there is a lot of room for its future growth.

The MiCA regulation was approved by a vote of 517 to 38. The new regulation represents a major step towards integrating cryptocurrencies into the traditional financial system and towards transparency and consumer protection within digital assets.