The EU’s planned regulatory system for cryptocurrencies is another step towards becoming official. On Wednesday, the European Council, which governs the EU’s political agenda, announced its position on the Crypto-Asset Market Framework (MiCA) and the Digital Flexibility Act (DORA).
Following an agreement that must then be ratified, the European Council and Parliament can now start discussions on the initiative before it is finally approved as law.
The MiCA platform is designed to protect investors and consumers from fraud, including investor protection measures in the event of a breach. If the authorities believe that certain virtual currency exchanges pose a threat to investors or users, they may impose stricter rules on them in accordance with MiCA.
Another major goal of MiCA is to control issuers of stablecoins after Facebook wanted to create a stablecoin, originally called “Libra”, backed by a basket of fiat currencies.
The European Central Bank (ECB) said the new rules would set comparable cultural standards for payment service providers to keep users safe. According to a recent statement from the ECB, the structure will also include provisions related to corporate governance and risk management, as well as a ban on the provision of services such as high-risk payment instruments.
The European Council’s MiCA negotiating mandate, which is more than 400 pages long, indicates that the EU will not soften its position on issuers of asset tokens. It states that it should be subject to stricter obligations than other issuers of cryptocurrencies.
A number of exceptions are included in MiCA’s negotiating mandate. The board agreed that tokens called assets authorized under the EU Capital Requirements Directive “shall not require further authorization under [MiCA] to be issued.” According to MiCA, banks and other financial institutions that provide settlement services for stack coins should be exempted from the capital requirement.
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According to the council, non-perishable tokens, including digital art and collectibles priced based on the unique features of each cryptoactive and the benefits it offers, are not subject to MiCA rules. The rules do not apply to tokens that are unique services or real assets, such as “mortgaging a product or property”.
The European Commission released the MiCA Framework in September 2020 as part of a larger digital finance initiative.