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- IOTA has shared some concerns over the European Parliament’s proposal of crypto regulations including inconsistent terminologies, DeFi, self-hosted wallets, etc.
- IOTA notes that the proposal takes a one-size-fits-all approach for NFTs which is not realistic and could stifle innovation.
The IOTA Foundation has been working with various government agencies and helping them address several regulatory concerns for addressing different sectors of the cryptocurrency market. Recently, the European Parliament passed anti-money laundering and anti-terrorism legislation to create robust and enforceable transparency requirements for the transfer of digital assets.
The IOTA Foundation has submitted a proposal sharing its views and concerns regarding the European Parliament’s AMLR proposal.
Some Observations Made By the IOTA Foundation
- Inconsistent Terminology: The IOTA Foundation pointed out the inconsistency in terminology between wallets, addresses, and accounts in crypto regulation creating uncertainty for the industry.
- NFTs: IOTA noted that the European Parliament has undertaken a one-size-fits-all approach towards NFTs and NFT platforms without considering their business models or use cases. Also, the MiCA regulation has exempted NFTs from its application. IOTA believes that not all NFT platforms should be subjected to the same regulatory or KYC process.
- Decentralized Finance: As per the parliament’s proposed recital 6a, the AMLR rules would also consider DeFi within its scope thereby creating a disproportionate burden on owners, developers, and operators, which as per IOTA are not obligated entities. Furthermore, IOTA says that this Recital overlooks the reasoning behind leaving DeFi out of the scope of the MiCA regulation.
- Self-Hosted Wallets: As per the European Parliament’s Recital 94a and article 59a, persons trading in goods or providing services will be prohibited from interacting with the self-hosted wallets which haven’t implemented a KYC process for transactions exceeding 1,000 EUR. IOTA says that this discriminates against DLTs and may also stifle innovation.
Furthermore, the IOTA Foundation stated that there are inconsistencies between the terminology used in the Transfer of Funds Regulation, the Markets in Crypto Assets (MiCA) Regulation, as well as the proposal for Anti-Money Laundering Regulation.
IOTA Foundation states that it is important to maintain the distinction between wallets, addresses, and accounts, thereby maintaining enough clarity on the desire of the regulatory bodies on what should be subjected to KYC.
Clarity on NFT Regulations
IOTA Foundation noted that the MICA Regulation exempts non-fungible tokens (NFTs) from its scope but in their recent proposal, the European Parliament undertakes a one-size fits all approach without considering their business model or use cases.
As per IOTA, this is not realistic and prevents legal certainty, and can curtail innovation in the long term. IOTA notes that it is important to recognize multiple use cases of NFTs across different businesses such as branding, video games, e-commerce, and much more. Many of these should not be considered obliged entities subjected to full KYC requirements.
