Souvenir tokens representing the bitcoin cryptocurrency and the Ethereum network, with its native token ether, dive into the water in this May 17, 2022 illustration. REUTERS/Dado Ruvic/Illustration
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LONDON, July 1 (Reuters) – Cryptocurrency companies will need a license and customer safeguards to issue and sell digital tokens in the European Union under ground-breaking new rules agreed by the bloc to tame the volatile “Wild West” market .
Globally, crypto assets are largely unregulated, with national operators in the EU only required to demonstrate anti-money laundering controls.
Representatives of the European Parliament and EU countries hammered out a deal late Thursday on the Markets in Crypto Assets Act (MiCA).
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“Today we put order in the Wild West of crypto assets and set clear rules for a harmonized market,” said Stefan Berger, a center-right lawmaker who led the negotiations on behalf of parliament.
“The recent decline in the value of digital currencies shows us how very risky and speculative they are and that it is fundamental to act,” Berger said.
Crypto markets have tumbled this year, weighed down by the collapse of stablecoin terraUSD and major US crypto lender Celsius Network freezing withdrawals and transfers. Read more
Bitcoin, the largest token, has tumbled about 70% from its November high of $69,000, dragging down the entire market.
CONSUMER PROTECTION
The landmark regulation reaffirms the EU’s role as a standard-setter on digital matters, EU states said.
“With the new rules, crypto-asset service providers will have to comply with strict requirements to protect users’ wallets and take responsibility in case they lose investors’ crypto-assets,” they added.
The deal will need formal approval from the European Parliament and EU states to become law, followed by an implementation period.
The new law gives crypto asset issuers and related service providers a “passport” to serve customers across the EU from a single base.
Holders of stablecoins – a type of crypto designed to maintain a constant value – will receive a claim at any time and free of charge from the issuer, with all stablecoins monitored by the bloc’s banking watchdog EBA.
Robert Kopich, secretary general of the lobby group Blockchain for Europe, which includes major exchanges Binance and Crypto.com, said the rules were “mixed”.
“Thanks to last-minute changes, we also fear that stablecoins will essentially have no way to be profitable,” Kopich said.
AFME, the financial markets sector body, said the rules would bring certainty, reduce fragmentation and support the development of a healthy and well-functioning market.
More clarity is needed, however, to ensure that custodians of crypto assets are only on the hook in cases of negligence or misconduct, and not for events beyond the custodian’s control, such as the hacking of a nation state, AFME said.
NFT COMPROMISE
Many countries, including Ireland, Lithuania and Greece, have long opposed the inclusion of non-fungible tokens (NFTs), which are digital assets representing objects from art to videos.
But under pressure from EU lawmakers, the compromise reached on Thursday night stipulated that “NFTs will be excluded from the scope unless they fall into the existing categories of cryptoassets.”
Brussels will assess within 18 months whether stand-alone rules for NFTs are needed.
National regulators will be responsible for licensing crypto firms, but they will have to inform the EU securities watchdog ESMA about major operators.
ESMA will develop standards for crypto companies to disclose information about their environmental and climate footprint.
The United States and Great Britain, two major crypto hubs, have yet to approve such rules. Read more
The company behind major stablecoin USD Coin called the rules a “significant milestone.”
“While no comprehensive set of rules is perfect … it does provide practical solutions to problems that other jurisdictions are only beginning to grapple with,” US firm Circle said in a blog.
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Additional reporting by Tom Wilson in London and Francesco Guaraccio in Brussels Editing by Mark Potter, Jonathan Oatis and Gareth Jones
Our standards: The Thomson Reuters Trust Principles.
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