The European Parliament has approved a package of laws that should regulate the crypto market. It is the first European regulation on cryptocurrencies, such as Bitcoin and Ethereum. The laws should prevent the use of cryptocurrencies for money laundering, fraud and other illegal activities as much as possible.
In total, the European Parliament has approved two ‘packages of laws’. The first, Markets in Crypto Assets Regulation (MICA), is mainly intended to better inform crypto users and thus prevent scams.
For example, the law obliges crypto platforms to put on paper which technology they use and which risks may be associated with it.
The second package, Transfer of Funds Regulation (TFR), is intended to combat money laundering. For example, crypto platforms must do more to detect illegal activities. Just like banks, they must now also trace and report suspicious transactions.
‘Game Changer’
In recent years, billions of euros in crypto have been laundered and millions have been fraudulent. For example, the American crypto company FTX turned out to have spent billions in deposited money from their customers. When those customers wanted to withdraw their money during a price drop, they found out that their investment had gone up in smoke.
These laws must now prevent that. For example, crypto platforms must register with an EU country in order to operate within the EU. European financial supervisors will then check whether the platforms also comply with all the rules and do not take unnecessary risks.
MEP Paul Tang (PvdA) calls the law a ‘game changer’ for the crypto sector, which he believed was due for regulation. However, there is still plenty of work to be done: “Even with this regulation, there is still a chance of bad apples. This law will not be the last.”
More traceable, also less anonymous
As part of the TFR, the platforms must start storing customer data and, if necessary, share it with the authorities. This makes transactions more traceable and money laundering can be tackled better, but users become a lot less anonymous.
Also, not all parts of the crypto sector are addressed in the law. For example, the laws do not affect crypto loans or, for example, the use of NFTs.
The laws are expected to come into force in July, after being formally approved by all EU member states.
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