At a time when most financial regulators worldwide are sailing their way through enacting cryptocurrency regulations, the European Union (EU) has been assuming an urgent pace to release a planned framework regarding the novel asset class.
The next step towards the same was taken on Wednesday, when the European Council, which guides the EU’s political agenda, announced its position on the Markets in Crypto Assets (MiCA) framework, according to an official statement.
This move has made way for the Council and the European Parliament to enter into negotiations before the proposal is formally adopted into legislation.
Through the MiCA framework, the European regulators are aiming to provide protection to investors and consumers from not only fraud but also hacks that cryptocurrency platforms and exchanges are accustomed to. Moreover, if the regulators feel that any of these platforms are posing a threat to their users, they would broaden the regulations on them further.
Since the framework was laid out during Facebook’s attempts at establishing a stablecoin, “Libra,” which was backed by a basket of fiat currencies, the MiCA proposal places special emphasis on stablecoin governance.
According to a recent announcement made by the European Central Bank (ECB), the framework will also carry provisions addressing issues related to risk management and governance in crypto companies, along with prohibitions on offering access to buy high-risk payment instruments.
Moreover, the banks and other financial institutions that provide settlement services to stablecoins will be exempt from capital requirements. Similarly, the MiCA regulations do not apply to non-fungible tokens (NFTs) “including digital art and collectibles, whose value is attributable to each cryptoasset’s unique characteristics and the utility it gives to the token holder.”
The rules also do not apply to tokens that represent unique services or real assets, such as “product guarantees or real estate.”
The MiCA framework was first introduced in September 2020 by the European Commission, as part of a larger initiative to regulate the digital finance market.