The European Union Parliament has agreed on a unified regulation of crypto assets. Service providers will now require approval from authorities – in Germany from BaFin.
MiCA (Markets in Crypto Assets) is the directive that aims to uniformly regulate crypto assets within the European Union. This means a ban on Bitcoin and other cryptocurrencies in Europe is initially off the table, but providers of crypto assets will have to adhere to stricter rules and obtain approval from the respective national authority. In Germany, the financial services regulator BaFin will be responsible for approvals, explains the commercial law firm MTR Legal.
Mining many cryptocurrencies requires high energy consumption. Therefore, they are often considered environmentally harmful. With the MiCA directive, the EU now refrains from a ban; however, providers must provide information about their ecological and climate footprint. The European Securities and Markets Authority (ESMA) will issue the corresponding regulations. The European Commission must then present a report on the environmental impact of crypto assets and the introduction of binding minimum standards within two years.
Additionally, the new directive aims to protect consumers from risks associated with investments in cryptocurrencies and fraudulent providers. Thus, providers of crypto services are required to meet strict requirements to protect investors’ wallets. They are also held liable if they lose investors’ crypto assets. Furthermore, MiCA should also protect against market manipulation and insider trading.
According to the new directive, issuers of stablecoins must maintain sufficiently liquid reserves in a 1:1 ratio with other assets, partly in the form of deposits. They must also grant investors a free redemption right at any time. The European Banking Authority (EBA) has oversight.
Providers of crypto services will now need approval to operate in the EU. The approval will be issued by the respective national authorities, in Germany by BaFin.
The preliminary agreement must still be approved by the Council and European Parliament before implementation.
Experienced lawyers in capital market law can advise on the execution of the licensing procedures.
