The European Parliament has approved the first-ever EU legislation for tracking crypto-asset transfers.
This development aims to deter money laundering while establishing standard supervision and consumer protection guidelines. Crypto transfers will now be subject to the “travel rule,” which is already applicable in traditional finance. This rule mandates that transaction information, including the source and recipient of the asset, be documented and stored on both ends of the transfer.
According to the European Parliament’s press release, this legislation will also affect transactions over €1000 involving self-hosted wallets when interacting with hosted wallets overseen by crypto-asset service providers. Nevertheless, the new rules will not apply to transfers between individuals without a provider or among providers acting independently.
Moreover, the Parliament has approved common rules concerning the supervision, protection of consumers, and environmental safeguards of crypto-assets, including cryptocurrencies, under the MiCA framework. The MiCA regulations agreed upon with the Council in June 2022 contain provisions to prevent market manipulation and financial crime.
MiCA will cover crypto-assets that are not currently regulated by existing financial services laws. Key provisions target transparency, disclosure, authorization, and supervision of transactions for those issuing and trading crypto-assets. These provisions aim to better inform consumers about potential risks, costs, and charges associated with their transactions. The new legal framework is also designed to enhance market integrity and financial stability by regulating public offers of crypto-assets.
The legislation includes specific measures to combat money laundering and other illicit or criminal activities. The European Securities and Markets Authority (ESMA) will be responsible for creating a public register of non-compliant crypto-asset service providers operating within the EU without proper authorization.
Additionally, major service providers must disclose their energy consumption to address the “high carbon footprint” of cryptocurrencies.
Stefan Berger, the lead MEP for the MiCA regulation, said that the legislation places the EU at the forefront of the token economy, providing regulatory clarity for the European crypto-asset industry. Co-rapporteurs Ernest Urtasun and Assita Kanko emphasized the significance of this legislation in addressing loopholes in the EU’s AML framework and unifying the fragmented European market.
The legislation will now proceed to the Council for formal endorsement before being published in the EU Official Journal and entering into force 20 days later.
Binance Co-Founder and CEO “CZ” took to Twitter yesterday to share his thoughts on the European Parliament’s vote to implement MiCA regulations. He stated that this move signals the introduction of customized regulations for the crypto industry in one of the world’s largest markets, aimed at protecting users and fostering innovation.
CZ acknowledged that while the fine details of these regulations are crucial, he believes this is a practical solution to the industry’s challenges. With clear rules now in place for crypto exchanges operating in the EU, Binance is prepared to modify its business operations over the next 12-18 months to achieve full compliance.