The market for digital assets is about to be regulated by the European Union.
The Markets in Crypto Assets Regulation (also known as MiCA) framework was agreed upon by members of the European Council on October 5, marking a significant step toward creating guidelines for how crypto exchange platforms and other service providers ought to function and conduct their business activities within the borders of the European Union.
Before the plan is formally adopted, the European Parliament shall vote on it following the vote today October 10, in 5 days. If approved, it would ideally go into effect at the beginning of 2024.
MiCA suggests rules for companies that provide services related to digital assets, such as identification verification and minimum standards for stablecoin holdings. Stablecoin limits have lately come under the spotlight for authorities in the wake of Terra’s collapse. Compulsory identification checks have long been a standard practice among cryptocurrency businesses aiming to stop money laundering.
Crypto proponents have criticized MiCA’s attempt to place constraints on dollar-pegged stablecoins like Tether (USDT) and USD Coin (USDC) due to their importance in the market relative to stablecoins denominated on the euro. When French officials expressed reservations about maintaining the sovereignty of the euro, the draconian limits that were originally part of the stablecoin legislation were later placed back in.
In 2022, stablecoins and the larger cryptocurrency market are being closely watched by a number of regulatory bodies in addition to the European Council. The White House likewise took its most significant regulatory move to date in September when it unveiled the first United States regulatory framework for digital assets. The paper delineates how the American government is thinking regarding cryptocurrency regulation and calls on organizations like the Treasury and Securities and Exchange Commission (SEC) to resume overseeing the space over the ensuing months. It was released after President Biden signed an executive order on “Ensuring Responsible Development of Digital Assets.”
Similar to the European Union, the United States has made it apparent that it believes the moment is right to begin managing the asset class in the wake of a long bull run and subsequent market crash.
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