EU crypto regulation limits privacy to 1,000-euro threshold

Rick Steves

MiCA complements existing AML rules and aims to enhance financial stability and investor protection in Europe.

Negotiators from the EU’s Economic and Monetary Affairs Committee have reached a deal on the highly awaited Markets in Crypto Assets (MiCA) bill.

MiCA sets out the rules for how crypto and digital assets should be treated and will seek the implementation of supervisory provisions, consumer protections, and environmental safeguards.

Order in the ‘Wild West’ of crypto assets

The new legal framework, which has been debated since its inception in 2020, covers transparency, disclosure, authorization, and supervision of transactions by service providers and aims to provide a consistent approach across all 27 member states.

MiCA complements existing AML rules and aims to enhance financial stability and investor protection in Europe by requiring all cryptocurrency wallets to implement KYC procedures, among other rules.

Stefan Berger, a German member of the European Parliament who has been directly involved in passing the bill, said: “Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto-asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors. So far, crypto assets, such as cryptocurrencies, have been out of the scope of European legislation and too often, divergent laws exist in member States.”

The European Securities and Markets Authority (ESMA) will be given powers to step in to ban or restrict crypto platforms if they are seen to not properly protect investors, or threaten market integrity or financial stability.

The new framework aims to reduce anonymity to tackle money laundering and evasion of sanctions as the Ukraine-Russia conflict rages on.

Transfers between exchanges and so-called “un-hosted wallets” owned by individuals will need to be reported if the amount tops the 1,000-euro threshold, a contentious issue for crypto enthusiasts who often trade digital currencies for privacy reasons.

Crypto firms tap RegTech ahead of MiCA

MiCA was widely expected to be finalized this year. A number of digital asset firms operating or planning to expand into Europe have already taken steps ahead of schedule to ensure compliance.

Cryptocurrency exchange STEX, for example, has partnered with KYC and AML platform Ondato in March 2022 to ensure the exchange’s continued customer growth within a compliance environment of imminent new EU regulation of crypto-assets.

These developments haven’t stopped firms within the digital asset space from planning their expansion in the EU. Coinbase has recently announced it will target five potential European jurisdictions, namely Spain, Italy, France, the Netherlands, and Switzerland.

Coinbase already holds authorizations from Ireland and Germany, as well as the UK Financial Conduct Authority to operate a multilateral trading facility (MTF).

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