One step closer to officialization of the European Union’s proposed framework for regulating cryptocurrency is the European Council. The European Council, which directs the EU’s political agenda announced on Wednesday its position on the Markets in Crypto Assets framework (MiCA), and the Digital Operational Resilience Act(DORA).
After the agreement has been ratified, Parliament and the European Council may begin to discuss the initiative, before it is officially approved as legislation.
MiCA is designed to protect investors and consumers against fraud. It also guarantees that investors’ funds are safe in the event of hacking. Authorities could impose stricter regulations under MiCA if they believe certain virtual currency exchange platforms pose a risk to investors or users.
Another major goal of the MiCA is to regulate stablecoin issuers. This follows Facebook’s desire for a stablecoin.
According to the European Central Bank (ECB), the new regulations will create comparable cultural standards for payment service providers in order to ensure user safety. The ECB announced that the new framework will include provisions addressing company governance, risk management, and prohibitions from providing high-risk services like high-risk payment instrument.
Over 400 pages of the MiCA negotiation mandate by the European Council suggests that EU will not relax its stance regarding asset-referenced token issuances. They should have more stringent obligations that other issuers of crypto assets.
The negotiation mandate for MiCA included a number of exclusions. The Council agreed that asset-referenced tokens approved under the EU’s capital requirement directive “shouldn’t require another authorization under [MiCA]”. MiCA exempts banks and other financial institutions providing settlement services for stablecoins from capital requirements.
Related: Regulators are looking for stablecoins. But where should they begin?
The Council states that non-fungible tokens include digital art and collectibles. They are valued according to each crypto asset’s unique characteristics and benefits. Tokens that are unique services or real assets such as product guarantees or real property, do not fall under the MiCA rules.
As part of its larger digital financing initiative, the European Commission published the MiCA framework in September 2020.