2023-04-20 18:59:00
AT an overwhelming majority of 573 votes in favor (38 votes against and 18 abstentions), the European Union adopted, on Thursday, in the European Parliament, legislation – the MiCA regulation, governing cryptoactives. It was time. The resounding bankruptcies and scams of recent months, starting with the FTX scandal (estimated at 32 billion dollars), have largely tarnished the reputation of a sector which, since its inception, has escaped excessive scrutiny. No doubt on the pretext of not hampering innovation and the famous “blockchain” (the database that records all transactions).
Is this the end of the Wild West? Christine Lagarde, the boss of the ECB, in doubt. She has already called for a second MiCA settlement. When the regulation is published in the OJ, crypto-asset platforms registered in the EU will have another 18 months to comply with the legislation. In the meantime, the European Central Bank and European financial authorities will publish guidelines so that crypto-asset providers know how to adapt to the new regulations. But in 18 months, a lot can still happen for scammed individuals. At present, consumers’ rights to protection or redress are very limited, particularly if transactions take place outside the EU.
Binance, under investigation in the United States
The rapporteur, Stefan Berger (EPP), believes that MiCA will “protect the stability of the financial system” by checking that the business model is not dangerously excessive. He considers that “Facebook could never have seen the Libra project authorized with the new legislation”. Small assets are excluded from the legislation, which only addresses large issuers and service providers on the cryptoassets that are covered. Remember that the world leader, Binance is based in France, which wants to be a friendly country with fintech. The US financial derivatives regulator, the CFTC, has however taken legal action against Binance and its boss, Changpeng Zhao, a Canadian, accusing it of willfully circumventing US regulations.
READ ALSOYoung, modest… What is the profile of cryptocurrency enthusiasts? In MiCA, the so-called rule of travel rule will apply to crypto transactions to trace exchanges. In the banking sector, this rule applies from 1,000 euros. In the crypto-asset sector, the travel rule will prevail on the first euro exchanged. It is indeed necessary to trace the micropayments which had been used to finance Daesh or for pedophiles to afford online services for less than 10 euros. The MiCA regulation will protect consumers by requiring issuers of so-called “stablecoins” (so-called stablecoins, because they are backed by other assets) to build up a sufficiently liquid reserve, with a ratio of 1:1 and partly in the form of deposits. .
A mandatory repayment plan for cardholders
Crypto-asset holders will have priority access to reserves. The issuer must provide a repayment plan in the event of a crisis to guarantee holders to receive the equivalent of their assets in equivalent currencies. This reimbursement must be made without delay.
The MiCA regulation specifies that the European Banking Authority (EBA) will have to maintain a public register of non-compliant crypto-asset service providers. Reinforced checks will be carried out on those whose parent company is located on the list of third countries known for money laundering or on the blacklist of tax havens. Enhanced requirements may also apply to shareholders and management of crypto-asset service providers, in particular regarding their location.
Paris, capital of fintech
“Until now, there were no EU-wide rules for crypto-assets, only diverging national laws,” Stefan Berger points out. France took the lead with a first legislation in 2019. According to Bercy, French law remains, to this day, “the strictest in Europe”. If Paris wanted to be welcoming for crypto-assets, “there was never any question of attracting players through tax or other advantages, assures Bercy. We have precisely offered a rigorous framework, a guarantee of seriousness. And this is also what the actors who came to settle in France were looking for”.
READ ALSOMiCA, the European regulation that wants to chain cryptocurrenciesHowever, the 2019 French law remains insufficient, as it does not allow regulators – the Financial Markets Authority (AMF) and the Prudential Control and Resolution Authority (ACPR) – to bang their fists on the table. The MiCA regulation will give them the means to do so. In addition, Bercy has instructed the DGCCRF to tighten controls on players in the sector for consumer protection.
An approval that will harden
The method of regulation adopted by the Commission raises questions. Since cryptoassets are not currencies and only highly speculative financial assets, why lay down a specific regulation? “It was enough to add crypto-assets to all the European financial regulation texts, remarks Aurore Lalucq, MEP from the Socialists and Democrats group. Why should we distinguish between traditional finance and fintech? Why different and lighter rules for cryptoassets? It is surprising that the Commission here does not refer to the principle of level playing field which it relies on in all other sectors. »
READ ALSOFTX is dead, long live cryptos! Pending the entry into force of MiCA, Aurore Lalucq also highlights the weaknesses of French regulations. Cryptocurrency operators must, in France, obtain the approval of the AMF and be recognized as PSAN (digital asset service providers). “But there are two PSANs. Operators have the choice between a light registration procedure with the provision of an identity card, a clean criminal record…. There is a much more serious and heavier AMF approval. Coincidentally, all operators choose the lightweight procedure. This is enough for them to take advantage of the seal of the AMF. It is misleading for consumers. »
However, from 1is July, France superimposes the two procedures to introduce a single approval more demanding than the 2019 legislation while waiting for MiCA to come into force and further tighten the requirements.
The high energy cost of cryptos
Cryptoassets also raise environmental issues. “Mining” (the process of securing bitcoins) is energy-intensive. With MiCA, issuers will have to publish the energy consumption of their assets. We are not solving the problem, but we are counting on users to prefer the least energy-intensive processes.
Non-fungible tokens (NFTs), i.e. digital assets representing real objects such as works of art, music and videos, are excluded from the scope of the MiCA regulations unless they fit into the existing categories of cryptoassets. Within eighteen months, the European Commission will be asked to prepare a comprehensive assessment and, if deemed necessary, it will propose a specific regulatory regime for NFTs.
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