LONDON (Bywire News) - With cryptocurrencies attracting increased attention, the European Union will seek an agreement on ground-breaking rules on Thursday in order to regulate crypto as the industry gains more attention.
As crypto is globally unregulated, national operators in the EU are only required to step in when attempting to combat money laundering. However, there have been moves around the world to create a regulatory framework which will protect consumers while giving the sector much-needed clarity.
To that end, the EU is moving ahead with its Markets in Crypto Assets (MiCA) which would come into effect around the latter parts of 2023.
With this agreement, the EU hopes to put itself ahead of other global regulators in developing an official framework in which the crypto sector will operate. The bloc will aim to provide a “passport” for issuers of crypto assets and other services alike to serve clients from a single base whilst also adhering to capital and consumer protection rules.
Two of the world’s biggest centres for cryptocurrency, The US and Britain, are yet to approve similar rules. As such, the clarity being brought by the EU could attract firms away from both these centres and into the EU.
A source close to the talks claimed that three issues remained: non-fungible tokens (NFT), energy consumption and supervision. Whilst the new law is likely to only focus on token-like NFTs the EU wants to ensure authorisation and the supervision of crypto firms at a member state level.
The source added that the European Commission would focus on the energy footprint of crypto. In order to avoid disruption to their services, firms operating in EU states would have 18 months following the start date to acquire MiCA licenses.
Following the collapse of TerraUSD and Luna last month, crypto-assets came under pressure as the U.S. cryptocurrency lending platform Celsius Network also froze withdrawals and transfers earlier this month.
This month, Bitcoin dropped to lows of around $17,600 while currently trading at around $20,100. The drop has focused minds on the risks involved with cryptocurrencies. Given the fallout from Luna, regulators will be keen to strike a balance on rules which encourage positive innovation while still protecting customers.
(Writing by Samba Jallow, editing by Tom Cropper and Klaudia Fior)