LONDON (AP) – Europe has moved to lead the world in regulating the freewheeling cryptocurrency industry at a time when prices have plunged, wiping out fortunes, fuelling scepticism and sparking calls for tighter scrutiny.
European Union (EU) negotiators hammered out the final details for a provisional agreement late Thursday on a sweeping package of crypto regulations for the bloc’s 27 nations, known as Markets in Crypto Assets, or MiCA.
“In the Wild West of the crypto-world, MiCA will be a global standard setter,” the lead EU lawmaker negotiating the rules, Stefan Berger, said in a news release.
The EU’s crypto rules “will ensure a harmonised market, provide legal certainty for crypto-asset issuers, guarantee a level playing field for service providers and ensure high standards for consumer protection”.
The EU rules are “really the first comprehensive piece of crypto regulation in the world”, said Patrick Hansen, crypto venture adviser at Presight Capital, a venture capital fund.
“I think there will be a lot of jurisdictions that will look closely into how the EU has dealt with it since the EU is first here,” Hansen said.
He expected authorities in other places, especially smaller countries that don’t have the resources to draw up their own rules from scratch, to adopt ones similar to the EU’s, though “they might change a few details”.
Under the Markets in Crypto Assets regulations, exchanges, brokers and other crypto companies face strict rules aimed at protecting consumers.
Companies issuing or trading crypto assets such as stablecoins – which are usually tied to the dollar or a commodity like gold that make them less volatile than normal cryptocurrencies – face tough transparency requirements requiring them to provide detailed information on the risks, costs and charges that consumers face.
The rules will help novice crypto investors avoid falling victim to frauds and scams that regulators have warned are widespread in the industry.
“That’s a huge benefit in this space, especially for someone who has absolutely no idea where to go to or who to seek out or where to put my money into,” said Jackson Mueller, director of policy and government affairs at Securrency, a blockchain infrastructure company.
Providers of bitcoin-related services would fall under the regulations, but not bitcoin itself, the world’s most popular cryptocurrency that has lost more than 70 per cent of its value from its November peak.
To address concerns about the carbon footprint left by bitcoin mining, which guzzles massive amounts of electricity for “proof of work” computer processing to record and secure transactions, crypto companies will have to disclose their energy use and prominently display information online about their environmental and climate impact.
Negotiators exempted NFTs, or non-fungible tokens, which have boomed over the past year.