An EU parliamentary committee is working to regulate the crypto market. A ban on Bitcoin is probably off the table, but where does the Union’s regulation hang now?
Many blockchain experts would like to see more regulation for the cryptocurrency market. But when the European Union Parliament almost voted to ban Bitcoin, it caused an uproar in the crypto industry.
What’s going on with the EU’s financial regulators and what stage is the announced directive called Mica (Markets in Crypto-Assets) currently at?
Here are all the answers you need about the regulations that the EU wants to impose on Bitcoin and all other cryptocurrencies – in case you’re looking for the right insider news to invest and trade the best possible way with a crypto trading bot in 2022.
Why are EU Financial Authorities Warning Against Crypto Assets?
In a joint press statement, three EU financial authorities warned against the risks of crypto assets.
In their statement, the European Securities and Markets Authority ESMA, the European insurance regulator FIOPA and the European Banking Authority EBA described many cryptocurrencies as “highly risky and speculative.”
As the authorities point out, crypto assets are unsuitable for most retail customers. Particular risk comes from total losses, misleading advertising and promises of quick and high returns, they say.
EU financial authorities are in favor of extending EU sanctions against Russia to the crypto market.
How Does the EU Plan to Regulate the Crypto Market?
Mica (Markets in Crypto-Assets) is the name of the directive for the provision of crypto services, which even envisaged a bitcoin ban in the meantime.
However, that is off the table again. “We are at the beginning of changing financial behavior and changing financial flows through tokenization. This is exactly what Mica is supposed to regulate,” said EU parliamentarian Stefan Berger in a press event.
The politician is the rapporteur of the EU Parliament’s Econ Committee, which deals with Mica.
“The subject of Mica is not Bitcoin, but the incipient tokenization,” Berger clarified. With a regulation formulated now, he said, the EU cannot grasp already existing cryptocurrency.
The Mica Directive, Berger said, only makes sense if it regulates the issuance of new tokens and cryptocurrencies. He also said non-fungible tokens (NFTs) are not affected. The Mica Directive, Berger stated, only regulates fungible tokens, such as cryptocurrencies.
Why Should Bitcoin be Banned in the EU?
Currently, a ban on cryptocurrencies through Mica regulation is off the table. However, at the end of February, the EU’s Economic Affairs Committee introduced a ban to the Parliament with the original draft of the Mica regulation: a passage in it would have provided for a de facto ban on Bitcoin and other cryptocurrencies from 2025 based on the proof-of-work (PoW) consensus mechanism.
The reason for this strict proposal was the extremely high energy consumption of PoW protocols. MEPs from multiple political parties had insisted on this ban on crypto services based on an “environmentally unsustainable consensus mechanism.”
However, the majority of MEPs in the relevant committee ultimately voted against an ecological crypto ban.
For Stefan Berger, who was the rapporteur for the Mica Directive in the committee, this was cause for celebration. “Such a ban would have torpedoed Europe’s competitiveness in the long term,” he said in a press briefing.
Does the EU not Regulate Bitcoin at All?
Yes, it does. As EU parliamentarian Stefan Berger describes, the new Mica regulation is not intended to target already existing cryptocurrencies such as Bitcoin, Ethereum and Co, but these would be regulated by the EU’s taxonomy. The EU taxonomy regulation classifies sustainable economic activities.
When Will an EU Regulation of the Crypto Market Come into Force?
Several steps are required before a regulation finally comes into force. First and foremost is agreement in the relevant committee of the EU Parliament.
The Econ Committee then submits its draft to the Parliament. In further steps, the EU Commission and Council would also give their blessing.
One of the biggest hurdles to the directive coming into force, however, is the vote and discussion of the draft in the plenary of the EU Parliament.
Social democratic parties in Europe might want to hold up the Mica proposal, fears committee spokesman Berger (CDU). “That could delay the Mica Directive by a few months and would be a wrong signal,” he says.
What is the Significance of the Mica Regulation?
As committee spokesman Berger notes, the EU Parliament does not intend to ban cryptocurrencies.
In doing so, he distanced himself from the actions of China or Turkey. “But I think the U.S. will adopt a lot of Mica,” he said in the press briefing. In the Ukraine war, Berger did not attach any importance to tougher EU regulation of the crypto market.
For circumventing Western financial sanctions, cryptocurrencies are not the means of choice, he said.
What Does Mica Mean for the Digital Euro?
Like other countries, the European Central Bank is working on a central bank digital currency (CBDC). This digital euro, according to the authorities, could exist in a few years.
However, the introduction of a CBDC and the regulation of the crypto market in the EU are separate projects, Stefan Berger assured on Friday.
“A digital euro is indispensable,” the EPP MEP said. Whether or not it will be based on blockchain technology, however, is not yet clear, he added.
