The European Union enacts strict new regulations that require the physical presence of stablecoin issuers

Source: Adobe Stock / Sergey Kelin

After the European Union reached an agreement on crypto asset regulation that sets strict rules for all players in the crypto market, the crypto industry is reminded that there is “more work to be done.”

Rebecca Rittig, General Counsel of Decentralized Finance Platform Aave (AAVE) and Board Member of the Crypto-Friendly Company Silvergate Bank, praised efforts to “clear the crypto space” it “has been asking for for years”. But there is a lot that needs to be done.”

She went on to say that with DeFi being next on the EU’s radar, the DeFi sector now needs to ensure that policy makers understand the technology and the fact that DeFi “needs a different regulation” than central crypto operators.

“As the European Union deals with DeFi, we will work with policy makers to ensure a secure and resilient system for users, while creating space for more innovation in the world of Web3,” added Rettig.

Meanwhile, the new rules represent an interim agreement on the long-awaited regulatory framework for Markets in Crypto Assets (MiCA) and require so-called crypto asset service providers (CASPs) to a much higher degree than before.

Bruno Le Maire, France’s Minister of Economy, Finance, Industry and Digital Sovereignty, commented on the deal, saying that the new regulation would “put an end to the cryptocurrency wild west” while strengthening the EU’s role as “a record-setter on digital issues.” He agreed.

Among the requirements placed on CASPs under the new regulations is the legal liability of companies if they lose crypto assets to their clients. The rule applies to all central companies in the crypto space, including wallet providers for “hosted” or reserve wallets, but not for so-called “non-hosted” wallets.

In addition to the portfolio rules, the new regulations also introduced new requirements designed to prevent “market manipulation and insider trading,” according to the announcement.

In addition, the regulations detail the “environmental and climate footprint” of different players in the crypto-asset market. In the future, these actors will be obliged to make public information about their environmental impact, in accordance with the technical criteria they have established. European Securities and Markets Authority (ESMA) to develop it.

The ad added that European Commission Publish a report on the environmental impact of crypto assets within two years and provide “minimum binding sustainability criteria” for consensus mechanisms such as Proof of Work (PoW).

In addition, the recently reached agreement states that European Banking Authority (EBA) Its job is to keep an updated list of all service providers that do not comply with EU rules.

Additional measures will be taken for service providers whose parent company is located in countries designated by the European Union as having a high risk of money laundering or in countries included in the European Union’s list of “non-cooperative tax authorities”. These include “enhanced controls” in line with the EU’s anti-money laundering framework.

Compatible stablecoins

For stablecoins, the new regulations state that only fully secured stablecoins will be compatible and that owners must be able to “return the coin from the issuer at any time and at no cost” in a 1:1 ratio.

She added that all stablecoins are subject to supervision European Banking Authority will fall.

The physical presence of a stablecoin issuer in the EU will be a “prerequisite for any issuance.”

Philip Pieper, co-founder of infrastructure provider DeFi swarmtold that the new rules would hit stablecoins hard.

Stablecoins are “in the crossfire,” Pieper said in an email comment, while correctly predicting that “some very aggressive new rules are coming in terms of registration and issuance.”

Except for NFTs

The announcement states that non-fungible tokens (NFTs) are “exempt from scope unless they fall within existing crypto asset classes.”

She added that the European Commission would propose more regulations for the NFT market “if necessary”.

Subject to approval

The new rules are not yet dated European Council And from European Parliament It was approved prior to its entry into force.

It comes on top of the Fund Transfer Regulation (TFR) passed earlier this week, which includes traceability of cryptocurrency transfers and rules for so-called “non-hosted wallets.”

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