It was less one for the French Presidency of the European Union, which had made it one of its goals, and which ended on 30 June. The presidency of the Council of the European Union and the European Parliament reached a preliminary agreement on Wednesday and Thursday on the regulation on cryptocurrencies MiCA and the regulation on money transfers TFR, on money laundering and terrorist financing, after several months of negotiations. Bercy declared himself satisfied with the final agreement.
These two texts, which are linked, create for the first time a harmonized framework for the regulation of cryptocurrencies. They still need to be confirmed by the Council and Parliament before being formally adopted. Of a legislative nature, in contrast to directives, they are directly applicable in EU countries.
European PSAN: capital requirements
The MiCA Regulation defines several categories of cryptocurrencies and their regulatory framework. It is inspired by the French rules on digital asset providers (PSANs) to regulate market players, such as trading platforms. These will need a permit to carry out their activities within the EU, comparable to the French approval procedure, which, in addition to the registration procedure currently used by all NASPs, imposes financial constraints. The permits will be issued by the national authorities, but the European authorities will be involved in the supervision of actors of significant size.
European PSANs will be “now considered liable in case of loss”, states a press release from the European Council, to better protect investors. However, the scope of this responsibility is unclear, e.g. in case of hacking.
Stablecoins: minimum liquidity reserves
The regulation covers in particular stack coins, these cryptocurrencies supported by “fiat” currencies, which it will impose on their issuers “to constitute a sufficiently liquid reserve, with a ratio of 1/1 and partly in the form of deposits”. Each holder of stablecoins must be able to be repaid at any time by the issuer, which imposes minimum liquidity reserves.
Stablecoins will be monitored by the European Banking Authority (EBA). The development of stablecoins supported by a non-European currency “used as a means of payment will be limited to maintaining our monetary sovereignty”, says the Council. On June 30, the American company Circle (creator of USDC) launched a euro stablecoin, Euro Coin.
NFT, environmental impact: see you in 18 to 24 months
NFTs are not currently covered by MiCA. However, the text is designed to make room for development with the idea that it will have to evolve to adapt to the rapid changes in this sector. Thus, within 18 months, the European Commission must assess the need to propose a specific regulatory regime for NFTs.
Similarly, within two years it will have to present a report on the environmental impact of cryptocurrencies and the introduction of minimum standards on consensus mechanisms, including evidence of work. In the meantime, SAPNs need to provide information on their environmental and climate footprint.
The platforms will have a period of 12 to 18 months to comply with the new rules, from their entry into force.
TFR: an extended scope
The TFR Regulation, for its part, updates the rules on information accompanying transfers of funds by extending the scope of those rules to transfers of cryptocurrencies. The aim is to oblige the PSANs to collect data concerning the sender and recipient of the transfers they process. “EU makes it harder to use cryptocurrencies for criminal purposes”, the council explains. Its application plan will be in line with MiCA’s.
Specifically, the TFR Regulation will apply to all transactions involving a PSAN, ie a centralized service provider, from the first euro. This will also apply to transfers between a decentralized wallet (not hosted) and a PSAN, from 1000 euros.
The regulation involves the collection of data on the identity of the parties to the transactions, data to be made available to the authorities in the event of an investigation into money laundering or terrorist financing. PSANs must also verify that fund transmitters are not subject to sanctions.
Only fully decentralized transactions (person to person, without intermediary) do not fall within the scope of the TFR Regulation.