- The Council of the European Union (EU) has come up with two proposals generally aimed at promoting investor protection and mitigating cyber threats in the cryptocurrency industry.
- The proposals, MiCA and DORA, are pending Parliamentary and Council negotiations, after which they will be applied throughout member states if approved.
On Wednesday, the Council of the European Union (EU) ratified two proposals focusing on the cryptocurrency industry. Now part of the digital finance package, the two aim at protecting consumers and reducing the risk of cyber threats. They are the Regulation on Markets in Crypto Assets (MiCA) and the Digital Operational Resilience Act (DORA).
Notably, MiCA sets a framework for the issuance and services of transferrable digital assets. The proposal primarily urges transparency in firms’ operations, which should be communicated through their white papers and additional prospectuses. Additionally, such firms should ensure their marketing strategies are “fair” and “clearly identifiable” as advertisements.
The MiCA proposal, however, does not apply to central bank digital currencies (CBDCs) or other tokens issued by public authorities. Also exempted are non-fungible tokens (NFTs), tokens that function like loyalty points or those that represent physical assets or services. Importantly, the framework is said to apply to natural or legal persons, and not the tech itself.
The Council identifies MiCA as a framework that supports innovation and acknowledges the potential of cryptocurrency. At the same time, the proposal maintains financial stability and investor protection.
The second proposal, DORA, sets out a structure for managing risk in information and communication technology (ICT). Specifically, it instructs that all ICT systems undergo testing to avert cybercrime risks. It also creates uniformity for reporting incidents threatening cyber security. Moreover, through this proposal, European regulators get the mandate to oversee a company’s third-party ICT service providers. The Council sees DORA as a way for firms to create defenses against ICT-related disruptions and threats.
Cryptocurrency package by the European Union Council
Also contained in the Council’s package is an overall strategy for cryptocurrency regulation and a proposal on distributed ledger technology (DLT). The digital package wholesomely unified crypto-related rules and regulations in the EU. This fosters technological innovation and investor protection among its member states. The common directives are viewed as more applicable compared to fragmented and differing rules between EU states.
“A dedicated and harmonized framework is, therefore, necessary at Union level to provide specific rules for cryptocurrency and related activities and services and to clarify the applicable legal framework,” read a proposal in the package.
Such harmonized framework should also cover services related to crypto-assets where these services are not yet covered by Union legislation on financial services.
At present, the pair of proposals await negotiations between the Council and Parliament. Once the two authorities reach a provisional agreement, both will adopt regulations stated in the proposals.
The EU is now among other jurisdictions seeking to provide regulatory clarity in the digital assets industry. Others include South Korea, the UK, Russia, and Iran.