- There are set to be updates to the MiCA and TFR crypto regulations.
- The updates to these EU crypto regulations will significantly impact the crypto market in the EU and other regions.
Presight Capital’s Crypto Venture Advisor, Patrick Hansen, has shared updates on the EU’s plans regarding the two necessary crypto regulations (MiCA and TFR). Media reports claim that the Markets in Crypto Assets (MiCA) regulation seeks to ban pow-related crypto mining operations. The second is the Transfer of Funds Regulation (TFR), mainly targeted at “unhosted wallets.”
The three leading EU institutions (commission, council, and parliament) will meet on Thursday, June 30, to make the final updates to the popular MiCA bill. While most of the top issues have been discussed, few remain. They are yet to discuss whether NFTs would be out of the scope of MiCA.
1/ The two most important EU crypto regulations to date, MiCA ("PoW-ban") & TFR ("unhosted wallets"), are about to be finalized by the end of June.
They have huge implications for the crypto market in the EU and beyond.
Here is a quick update thread on both regulations 👇
— Patrick Hansen (@paddi_hansen) June 25, 2022
The commission wants MiCA’s scope to cover NFTs to protect the consumer. However, the council and parliament seem to have agreed after being against it. According to Hansen, the most likely outcome would be an exemption for NFT issuers.
However, the updated regulation won’t exempt companies (such as NFT marketplaces and platforms) and service providers of third-party NFTs. The high-volume players would require a CASP license while the small-volume players won’t.
Stablecoins and crypto’s environmental impact
The essential aspects of stablecoins are closed. Some of the conclusions include no CASP interest on stablecoins and thorough regulatory prerequisites for issuers of e-money tokens (EMTs) and asset referenced tokens (ARTs)
MiCA will also allow EU authorities to decide whether to disallow stablecoin issuance (ARTs & non-Euro EMTs) for large-scale payments. The yet-to-be-discussed aspects are technical details regarding significant stablecoins.
Also, there would be a discussion on the details of supervisory architecture. Would it be the national crime agency (NCA) or other European supervisory authorities such as EBA and EBSMA? After lengthy discussions, MiCA’s scope won’t cover the decentralized finance (DeFi) space.
The commission will release a new report about it next year. Also, it will create a dedicated pilot project for a new form of “embedded DeFi” supervision. Regarding the environmental effect of crypto, the Bitcoin ban is no longer on the table.
But, CASPs will require detailed disclosure. The ESMA will provide the requirements for each crypto asset for which they provide services. For example, ETH. There will be discussions on AML provisions. The aspects MiCA will cover and the ones TFR & AMLD (Anti-Money Laundering Directive) will cover.
Other topics to be discussed on Thursday include implementation periods, exact supervisory framework, and fine details on other previous issues. The parties are positive about concluding all negotiations by the end of this month. Then, they will vote formally on the adopted compromise during the plenary session of the parliament before MiCA becomes law.
The TFR negotiations
Hansen stated that the TFR negotiations could take longer because they are contentious right now. However, there have been some conclusions already. The TFR’s scope won’t cover p2p transfers (wallet <> wallet). Also, all crypto transfers will fall under TFR. But there would no longer be a 1,000-Euro cap on applying these AML rules.
The verification of unhosted wallets is one of the contentious issues. The parliament wants the CASPs to identify other unhosted wallets. However, the council & commission are not in support. Both cite economic and AML reasons for their decision.
The council made an alternative suggestion. It suggested that CASPs should address the AML’s risk based on blockchain analytics. Then, use the result to take additional mitigating measures. These two EU crypto regulatory policies are important for the market because they will likely set a precedent for crypto regulation in other regions.