The European organization would have the task of licensing crypto-related institutions and exchanges, putting national regulators under its authority.
The latest draft of MiCA, the Markets in Crypto Assets regulation, has brought significant changes to the way in which cryptocurrency licenses for organizations are approved. The draft, approved by the EU Parliament, assigns the role to ESMA, the European Securities and Markets Authority, undermining the authority of institutions like the Bafin in Germany, or the CNMV in Spain on the subject.
This draft mimics the system that the EU also uses for approving banking licenses in the region, where the European Central Bank is the only authority capable of granting or revoking banking licenses to entities inside the system.
However, in previous iterations of the mentioned draft, it was the national regulators that were responsible for this task. The reasons for the change in the focus of this aspect of the law have not been announced yet.
Furthermore, a new directive gives ESMA the ability to determine which crypto assets are under the scope of the law, and which aren’t. The directive states ESMA will issue “guidelines that reduce legal uncertainty and guarantee fair competition conditions between market operators.”
The new draft also introduces a new classification for a kind of crypto assets called “e-money tokens,” which are stablecoins linked to legal tender currencies. These tokens are of special importance for MiCA because of their usage as payment methods.
The issuers of these tokens must have a banking license or operate as an electronic money entity. Traditional assets and NFTs are not within the scope of the law, meaning these would be managed by the regulators of each country as they see fit.
All of the changes proposed are still subject to approval, but the whole text might be greenlighted in Q3. A lot of controversies have resulted from the inclusion of some clauses in the draft. For example, the ban on proof-of-work-based cryptocurrencies due to sustainability concerns that has now been dropped.
Another European crypto law that has received backlash is the Transfer of Funds Regulation, which seeks to apply stringent controls to cryptocurrency transactions, including those initiated from unhosted wallets.