The EU Parliament has approved legislation to impose stricter regulations on cryptocurrencies such as Bitcoin. This new law aims to safeguard consumers against financial losses and increase the challenges of money laundering and terrorist financing. Furthermore, providers will be held accountable for significant losses. Europe intends to put an end to the unregulated nature of the blockchain industry with this legislation.
On April 20th, the EU-Parliament approved the “Regulation on Markets in Crypto Assets” (MiCA) with a significant majority. Previously, trading cryptocurrencies allowed for a high level of anonymity. Bitcoin and other cryptocurrencies were favored by individuals involved in money laundering and fraudulent activities. However, this situation is now set to change.
Crypto exchanges will be subject to national supervisory authorities
The regulation aims to increase the difficulty of engaging in insider trading and abusing power. Money laundering regulations must be followed by service providers and suppliers of crypto-assets. Additionally, national supervisory authorities will oversee platforms and crypto exchanges. Platforms that facilitate cryptocurrency trading must also disclose information about the sender and recipient of transactions.
This is the first law to comprehensively regulate cryptocurrencies such as Bitcoin, Etherum, etc. Evelyn Regner, Vice-President of the EU Parliament, comments on the decision:
By enacting this legislation, we are not just establishing a framework for overseeing cryptocurrency markets, but more importantly, enhancing safeguards for consumers and investors while providing greater legal assurance for service providers.
EU Regulation on Cryptocurrencies makes money laundering and terrorist financing more difficult
The regulation also guarantees improved monitoring of trading involving Bitcoin and other cryptocurrencies. This enables faster detection of suspicious transactions associated with money laundering or terrorism.
Regner stated that it is high time to address the issue, as cryptocurrencies are frequently used as a means to conceal illicit financial transactions, under the pretext of innovation. In the year 2022 alone, a staggering amount of 22 billion euros were illegally laundered through crypto assets. It is imperative that immediate action is taken to halt this practice.
The implementation of the regulation will occur gradually starting from 23 June. Starting in July 2024, stablecoins, which are crypto-assets tied to currencies, will be required to demonstrate greater financial reserves for approval. The full regulation will be enforced no later than January 2025. European Parliament member Stefan Berger believes that this will mark the end of the unregulated nature of the blockchain industry.
Bitcoin mining consumes an equivalent amount of energy annually as the entire country of Austria.
Regner highlights that the current regulation on cryptocurrencies in the EU is merely an initial measure. He emphasizes that despite its implementation, there is still more to be accomplished due to the ongoing rapid growth of crypto markets. Consequently, the EU Commission should maintain vigilant observation of developments in crypto asset markets and suggest additional regulations as necessary.
In the realm of sustainability, it is crucial to make significant improvements. “The energy consumption of Bitcoin mining alone equals that of Austria in a year. Hence, it is essential to establish sustainability standards in the future, despite facing significant opposition from the center-right that has prevented their inclusion in the current regulations.”