European institutions have reached a provisional agreement on the MiCA regulation establishing new rules on crypto assets under the ESMA supervision.
On June 30, the new European Union provisions on crypto assets were finally agreed on and adopted. The trilogue has also just reached agreement on another major text for crypto: MiCA.
First introduced in 2020, MiCA went through several iterations before reaching this point, with some proving to be more controversial than others. An earlier draft of the present law included a clause that sought to effectively ban Bitcoin and other cryptocurrencies created using the energy-intensive proof-of-work mining process, yet it was later rescinded due to severe industry backlash.
The key legislation will regulate the crypto industry with common rules across all 27 member states, marking the first time anywhere in the world lawmakers have attempted to oversee the industry on such a scale.
The European Parliament, the Council and the Commission approved new provisions on oversight of crypto-asset service providers (CASPs), consumer protection and environmental safeguards for crypto-assets, including cryptocurrencies such as than Bitcoin and Ether. The European Securities and Markets Authority, or ESMA, will be responsible for overseeing the industry, while a new legal framework will seek to regulate public offerings of crypto-assets to protect market integrity.
Environment, NFT, and list of crypto providers
The MiCA (Markets in Crypto-Assets) Directive will be applying within the 27 Member States and includes measures on the supervision of digital asset service providers (PSAN), consumer protection and the environment.
Several proposals in the text were debated. Among these, a ban on proof of work blockchains like Bitcoin and Ethereum because of their excessive energy consumption.
This measure is not adopted. Nevertheless, “crypto-asset providers will have to publish the energy consumption and the impact of the assets on the environment in the future”, specifies Stefan Berger, Parliament’s representative on MiCA.
This obligation will be based on the technical standards defined by the sector regulator. And the authority chosen to oversee the crypto-asset markets will be ESMA, the European Securities and Markets Authority.
NFTs partially exempted
Another rejected proposal: the inclusion of NFTs in MiCA. These tokens meet multiple use cases, many of which are unrelated to finance. The trialogue therefore provides an exemption for NFTs offered to the public at a fixed price.
Non-fungible tokens that are offered to the public at a fixed price, such as for tickets to an event or as an item in a video game, will be exempt from the new rules, although Parliament said they could be introduced under MiCA soon. NFTs were a prominent point of contention among member states in discussions ahead of the discussion final round, according to official representatives.
Money laundering issues have also been resolved and ESMA will be tasked with maintaining a public registry listing all non-compliant crypto providers offering services without authorization.
A blacklist of non-compliant PSANs will be established. This will be drawn up by ESMA, which will identify the crypto-asset service providers offering their services in Europe without authorization.
The next step for MiCA after this provisional agreement is an approval of the text by the Economic and Monetary Affairs Committee, followed by a vote in plenary session. Prior to the entry into force of MiCA, the agreement will also have to be approved by the Board.
Ernest Urtasun, a MiCA shadow spokesman and Greens MP, stated the final version of the directive obliges lawmakers to consider the environmental impact of cryptoassets in a future review.