The regulation of cryptocurrencies is promoted.
Cryptocurrencies will soon be regulated uniformly in the EU. Regulation has two sides: It can curb innovation. But it can also protect investors and make the market safer. And thus be the key to broad acceptance.
The crypto market has reached a turning point. Thanks to technological innovations, the digital currency system continues to evolve. At the same time, interest is growing among the general public. Bitcoin and co. are becoming increasingly popular.
With the spread of cryptocurrencies, the question of more regulations is being raised. Not everyone likes the idea of regulation. After all, digital currencies were created as a democratic system that is not under the control of central banks and state laws. These voices believe that this would prevent innovation.
On the other hand, regulations can also be of great benefit to all of us who want to be part of the crypto universe. Regulations aim to protect investors and curb fraud. In this way, they create a framework that makes the crypto ecosystem more transparent, secure and stable and promotes growth.
Regulation is handled differently around the world. The number of countries that accept cryptocurrencies as a legitimate payment method is increasing. Other countries partially accept cryptocurrencies and have already issued specific guidelines for crypto exchanges, wallet providers and trading, for example. In some countries, however, there is a ban.
Here is a global overview of the most important countries and their cryptocurrency regulations:
(Thomson Reuters, Special Report “Cryptos on the rise 2022)
What is the specific situation here in Europe? The individual EU countries still have different rules and regulations. However, legislation is now being standardized with the MiCA Regulation.
MiCA stands for "Markets in Crypto-Assets" and is a proposal by the European Commission for a comprehensive and uniform regulation of crypto assets within the EU. The regulation aims to ensure a high level of investor protection and financial stability. The aim is to promote the potential of crypto assets.
Investor protection and transparency
The MiCA regulations will apply to all crypto assets - i.e. cryptocurrencies, , but also . These are the most important provisions:
Crypto assets are uniformly defined and classified
In future, crypto service providers such as crypto exchanges and wallet providers will require a license in order to do business in the EU. In addition, they must provide security for their users, i.e. have sufficient capital to secure their business operations.
Crypto issuers and providers are obliged to be transparent and disclose information. This means that they must collect data from senders and recipients and report transactions worth more than 1,000 euros.
There are protective measures for investors, such as stricter requirements for the protection of their wallets.
Measures to combat money laundering and terrorist financing have also been defined.
Accelerated acceptance
Following final approval by the European Parliament, the MiCA Regulation is expected to enter into force in 2023 and become legally effective in 2024.
However, the proposed regulation has also been criticized. The innovative crypto industry welcomes the protection of users and investors. However, the main problem identified is the fact that a new technology is being regulated with an old technology and mindset. For example, the authorities' power to prevent the introduction of a token or coin if they consider it to be a "threat" to financial stability is criticized. This contradicts the nature of technology. It is feared that regulation will restrict creativity and technical innovation.
Everyone agrees that the MiCA regulation will bring transparency and investor protection for us all. This basis could significantly accelerate the spread of cryptocurrencies in the near future.
Sources and further reading:
- BaFin: European MiCA regulation: regulatory foundation for crypto assets
- Thomson Reuters: Special Report, Cryptos on the rise 2022 - a complex regulatory future
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