The EU’s planned cryptocurrency regulatory framework is one step closer to becoming a formal framework. On Wednesday, the European Council, which guides the EU’s political agenda, Announce Its position on the Encrypted Asset Market (MiCA) framework and the Digital Operational Resilience Act (DORA).
After the agreement must be approved, the European Council and Parliament may now start discussing the plan before it is finally approved as legislation.
The MiCA framework is designed to protect investors and consumers from fraud, including ensuring that investors’ funds are safe when hacked. If the authorities believe that certain virtual currency trading platforms pose a threat to investors or users, they can impose stricter regulations on them under MiCA.
Another main goal of MiCA is to manage stable currency issuers, because Facebook hopes to establish a stable currency, originally called “Libra”, backed by a basket of fiat currencies.
The European Central Bank (ECB) stated that the new regulations will establish similar cultural standards for payment service providers to ensure user safety. According to the European Central Bank’s recent announcement, the framework will also include provisions on corporate governance and risk management, as well as provisions prohibiting the provision of services such as high-risk payment instruments.
The European Council’s own MiCA negotiation authorization is more than 400 pages long, indicating that the EU will not relax its position on asset reference token issuers. It said they should have stricter obligations than other issuers of encrypted assets.
MiCA’s negotiation authorization contains some exclusions.The Council has agreed that asset reference tokens authorized under the EU Capital Requirements Directive “should not be based on [MiCA] issued. “According to MiCA, banks and other financial institutions that provide settlement services for stablecoins should be exempt from capital requirements.
According to the council, the value of irreplaceable tokens, including digital art and collectibles, is based on the unique characteristics of each encrypted asset and the benefits it provides, and is not subject to the MiCA rules. These rules do not apply to tokens that represent unique services or real assets, such as “product guarantees or real estate.”
European Commission releases MiCA framework In September 2020, as part of its larger digital financial plan.