The EU-Parliament has approved a legislation to enhance the regulation of cryptocurrencies such as Bitcoin. The aim of this new regulation is to safeguard consumers against financial losses and to increase the difficulty of engaging in money laundering and terrorist financing activities. Furthermore, providers will be held accountable for significant losses. Through this legislation, Europe intends to put an end to the unregulated nature of the blockchain industry often referred to as the “wild west”.
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. As a result, Bitcoin and other cryptocurrencies have been favored by individuals involved in money laundering and fraudulent activities. However, this situation is now expected 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. Furthermore, national supervisory authorities will have jurisdiction over platforms and crypto exchanges. Platforms that facilitate cryptocurrency trading must also disclose information about the sender and receiver 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 implementing this legislation, we are not just establishing a framework for overseeing cryptocurrency markets, but primarily enhancing safeguards for consumers and investors while also providing greater legal clarity for service providers.
EU Regulation on Cryptocurrencies makes money laundering and terrorist financing more difficult
At the same time, the regulation ensures that trading with Bitcoin & Co. can be better tracked. Suspicious transactions that are related to money laundering or terrorism, for example, can thus be identified more quickly.
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 was laundered through crypto assets. It is imperative to take immediate action to halt this illegal activity.
The implementation of the regulation will occur gradually starting on 23 June. Starting from 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 in effect no later than January 2025. European Parliament member Stefan Berger states that this will mark the conclusion of the unregulated nature of the blockchain industry.
Bitcoin mining uses an equivalent amount of energy annually as the entire country of Austria.
Regner emphasizes that the European Union’s regulation on cryptocurrencies is merely an initial measure. He states, “Nevertheless, the current regulation does not encompass all the necessary actions, as the crypto markets are evolving at a fast pace. Hence, it is imperative for the EU Commission to maintain vigilant oversight of the developments in crypto asset markets and suggest additional regulations if deemed necessary.”
In the realm of sustainability, it is crucial to make significant improvements. “Bitcoin mining alone uses as much energy each year as the entire country of Austria. Consequently, in the future, we must establish minimum sustainability standards. Unfortunately, these standards have not been included in the current regulations due to significant opposition from the center-right.”