The European Union (EU) has revealed its intentions to implement a regulatory framework for cryptocurrencies. This may serve as a blueprint for other countries to adopt. Many nations are waiting to see how this move by the EU will turn out.
Late last year, the European Commission (EC) proposed a crypto regulation. The proposal was entitled Markets in Crypto Assets (MiCA). The MiCA establishes organized principles guiding the crypto asset market. These principles do not contradict already existing laws and principles in the financial markets, rather they complement them.
The MiCA principles ensure transparency in the financial and crypto markets, allow for supervision by the entitled bodies, and grant users or consumers the expected protection. It aims at limiting fraudulent activities and promoting transparency while also supporting innovation.
At the moment, there are three categories of assets the MiCA intends to regulate. They are E-money tokens, asset-referenced tokens, as well as Utility and Algorithmic tokens. The MiCA, if implemented may make entry into the crypto market more demanding on the part of crypto issuers. However, it will provide a higher level of protection for all in the crypto space.
The Effect of the Implementation on Crypto-asset Issuers
Should the MiCA regulations be fully imposed, all issuers of crypto assets will have to be authorized and licensed in the EU before they can legally operate. Also, issuers of asset-referenced tokens will be subject to certain capital, governance, and business conduct requirements.
It will also be the duty of crypto-asset issuers to provide a fully detailed whitepaper that explains important information about the project. This enforcement will definitely drive a lot of crypto projects out of the space. It will however protect individuals from extremely risky and unreliable projects.
At the moment, European countries are not the only nations intending to regulate cryptocurrencies. Following the appointment of Joe Biden as Head of States, the United States of America has also been planning to regulate crypto assets in the country. Also, the Turkish government, amongst many other governments has made similar moves in recent times.