On Thursday evening, the Economic and Monetary Affairs Committee negotiators struck a provisional political agreement with the Council on new rules on crypto-assets (MiCA).

Key provisions agreed by negotiators for those issuing and trading crypto-assets (including asset-reference tokens and e-money tokens) cover transparency, disclosure, authorisation and supervision of transactions. Consumers would be better informed about risks, costs and charges. In addition, the new legal framework will support market integrity and financial stability by regulating public offers of crypto-assets. Finally, the agreed text includes measures against market manipulation and preventing money laundering, terrorist financing and other criminal activities.

Scope and anti-money laundering provisions

Negotiators decided that MiCA will cover crypto-assets that are not regulated by the existing financial services legislation. ESMA will be tasked with providing guidelines in this respect.

To counter money-laundering risks the European Securities and Markets Authority (ESMA) should set up a public register for non-compliant CASPs that provide services in the European Union without authorization.

Non-Fungible Tokens (NFT) are unique and unlike cryptocurrencies they are not traded or exchanged at equivalency. All sorts of NFTs offered to the public at a fixed price, such as cinema tickets, digital collectibles from clothing brands or in-game items in computer games will be exempt from the scope of MiCA. However, dependant of their development the rules envisage a re-classification of NFTs either as a financial instrument or as a crypto asset subject to MiCA.

Environmental safeguards

To reduce the high carbon footprint of crypto-currencies, particularly of the mechanisms used to validate transactions, significant CASPs will have to disclose their energy consumption. ESMA should prepare regulatory technical standards on these obligations to provide the market with clear guidance on how such disclosures should be carried out. CASPs should make publicly available, in a prominent place on their website, information on their environmental and climate impact and forward this information to their national competent authority, which will inform ESMA.

Quote

Stefan Berger (EPP, DE), the lead MEP, said: "MiCA is a European success. We are the first continent to have a crypto-asset regulation. In the Wild West of the crypto-world, MiCA will be a global standard setter. MiCA will ensure a harmonised market, provide legal certainty for crypto-asset issuers, guarantee a level playing field for service providers and ensure high standards for costumer protection. Tokenisation will be as ground breaking for the financial world as the introduction of the joint market was in the 17th century. With the MiCA regulation, reliable authorisation and supervisory structures for new tokens are now being created for the first time."

Next steps

The provisional political agreement reached by the EP negotiating team will now have to be approved first by the Economic and Monetary Affairs Committee, followed by a plenary vote. The Council also has to approve the deal, before it can come into force.