Recently, the European Parliament’s Committee on Economic and Monetary Affairs approved a draft version of its comprehensive Markets in Crypto Assets (or MiCA) crypto regulation package. This framework addresses a broad range of crypto-related topics, including the status of all major currencies as well as stablecoins, and regulation of crypto mining platforms and exchange platforms.
Stefan Berger is a member the Christian Democratic Union (CDU) and the Parliament’s reporteur for the MiCA regulation. This person is responsible for reporting on the proceedings related to this bill. The German politician strongly opposed, among others, a ban of proof-of-work (PoW),-based assets like Bitcoin (BTC) in the associated negotiations. Cointelegraph auf Deutsche spoke to Berger about the controversy surrounding the MiCA framework, and his opinions on the Transfer of Funds Regulation (also known as TFR).
“Critical examinations are already being conducted on one’s assets”
Berger said that the European Commission’s initial proposal to implement MiCA in September 2020 was timely. He stated that “we are at the threshold technology development” and that the regulation had taken up many points that urgently require to be regulated. MiCA was intended to be a “purely forward-looking financial industry regulation” that would “be kept technologically neutral.”
Initial agreement was reached in Parliament on key points of MiCA, but just before the vote, the Left and Greens, as well as Social Democrats, raised concerns about the regulation on environmental grounds. Berger stated that the discussion revolved around sustainability and whether the European Union should ban consensus mechanism such as PoW, which apparently does not meet certain sustainability criteria.
Berger presented his solution, linking crypto assets with the EU taxonomy. This is used to evaluate financial investments and to determine their sustainability. Berger stated that if equity funds have been evaluated by the Commission, then we can also assess crypto assets and stablecoins. “Everyone can then decide for themselves whether or not to continue. Already, the rethinking and critical evaluation of one’s financial assets and of the financial products one invests in are taking place.
PoW ban off the table
Trilogue negotiations are currently taking place between the European Commission and Council of Ministers to discuss the MiCA regulation. Berger stated that the proof-of-work ban has been removed from the table and hopes that the EU institutions can come up with a taxonomy solution that is “not too complicated”.
“I believe that we will reach a good conclusion and that the discussion won’t move in the direction to ban proof-of-work once again.”
The MiCA regulation will be in effect between mid- to late 2023. Financial supervisory authorities in member states have little room to maneuver, since they must cooperate with European bodies like the European Securities and Markets Authority and European Banking Authority. Berger noted that MiCA is supported largely by the European crypto community.
“Many member countries are interested in such a regulation that allows for growth and keeps development open. This is the first regulation of its kind on a continent. Many are now looking into it.
“Yes, regulations are necessary”
The latest MiCA draft didn’t include anti-money laundering regulation, but the European Commission prepared a separate package called the Transfer of Funds Regulation to address this issue. This framework establishes stricter disclosure rules for parties involved in crypto-asset transaction. Berger supports this AML regulation in principle. However, he doesn’t support the part that addresses so-called “unhosted wallets” — crypto accounts that aren’t managed by a custodian. Berger stated:
“I don’t need to present my ID card or identity card if I pay 100 euros in cash at a supermarket. It’s as simple as that. Why should it be any different in the crypto industry? That’s what I don’t get. Germany loves cash and accepts a 10,000 euro cash payment limit. If we have the rules for crypto, why not make them the same? Normal world, crypto-world. We need regulations, but we still need to allow for breathing.
“Cryptos don’t always have to be evil”
The results of the trilogue negotiations will determine the final decision on TFR. Berger is not the rapporteur in this process. Berger stated that the section on “unhosted wallets” was not proposed by either the council or the commission. Similar to the PoW ban in MiCA, this initiative was initiated by the Left, the Social Democrats, and the Greens.
Berger believes that the negotiations could result in the crypto-hostile TFR language being dropped. Berger also hopes that Christian Lindner (German Finance Minister) will make changes to the draft. Lindner is a member of the Liberal faction. This can be difficult because the majority of council members are Socialists, and Lindner is part of a coalition with Social Democrats in Germany.
“Many people who think in centrist terms don’t want decentralized systems.” This issue is causing a little bit of a split within the European Parliament. However, I believe that the Commission and Council of Ministers will view it differently.
Berger pointed out that understanding Bitcoin, stablecoins, and other digital assets takes time. Many politicians in the European Parliament have not yet gotten there.
Is their understanding going to improve? Berger said that blockchain technology is making more and more sense. Even the most scathing critics of cryptos need to see that “cryptos don’t always have to be evil.” For example, over $130 million in cryptocurrency donations went to Ukraine during its conflict with Russia. “And that’s also why I’m doing all this with MiCA to lay the foundations of a somewhat changed world.”
Here is a brief version of Stefan Berger’s interview. The full version can be found here (in German).