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Europe's Rules for Crypto World vs IMF's Plan

Following the failure of many major firms, notably the crypto exchange FTX, the EU approved Markets in Cryptoassets (MiCA) legislation.

Photo by Tabrez Syed / Unsplash / Blockhead

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The European Parliament has approved the first set of comprehensive rules for regulating crypto asset markets in the European Union (EU) by a large margin.

This marks the first time governments have attempted to control the nascent industry on such a scale.

By a vote of 517 in favour to 38 against, the House of Representatives approved the first complete set of rules governing the issuance and trade of crypto assets like bitcoin.

On Wednesday, European Financial Services Commissioner Mairead McGuinness stated that once the bloc's 27 member states formally adopt the law, it would go into effect in July. Some regulations, like those about stablecoins, will take effect in July 2024.

Crypto industry leaders have hailed MiCA, which has been in the works for three years, as a welcome alternative to the United States' method of monitoring the sector through enforcement proceedings.

However, detractors argue that the rule needs to be updated even before it goes into force, as it would not have prevented some of crypto's recent high-profile blowups.

In a debate on the rules, Mairead McGuinness said, "I hope that our rules could become a model for other countries."

The energy use of major service providers will be made public.

Legislators also approved new regulations to track the circulation of crypto assets like Bitcoin and electronic money tokens.

To counteract money laundering, the "travel rule" is used, which means that information about the crypto asset's origin and destination must travel with it and be retained on both ends of the transfer.

The regulation applies to transactions exceeding €1,000 sent from a "self-hosted" wallet or private user's crypto address.

On Wednesday, the head of the European Union's financial services industry suggested that the rest of the world follow the EU's lead in regulating cryptos.

But that puts the EU at loggerheads with the IMF and the G20 president, India, as both have been working on a basic structure of rules to oversee digital assets.

For now, though, the EU has formed the rules and urged other countries to adopt similar plans.

Crypto businesses must be authorised by the EU and adhere to anti-money laundering and counter-terrorism financing measures mandated by MiCA.

However, McGuinness, whose government officials created MiCA, emphasised that other nations should also do their share by establishing stringent laws. In other words, "global convergence is crucial."

British authorities have now released proposed guidelines for governing cryptos.

McGuinness stated that the committee would look at the possibility of new regulations for decentralised finance and the lending and borrowing of crypto assets.

She added, "We believe had FTX been captured under the EU's jurisdiction, many of its practices would not have been permissible under MiCA."

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