The European Council, the legislative arm of the European Union formally approved the historic Markets in Crypto Assets (MiCA) regulations on Tuesday, May 16th. The Council also agreed upon several anti-money laundering regulations for crypto fund transfers.
MiCA’s approval means that the European Union is now the first major jurisdiction in the world with its own legislation on cryptocurrency licensing.
In a statement released following the approval Swedish finance minister Elisabeth Svantesson, also chair of the Council Presidency, expressed her pleasure at how the approval of MiCA delivers on the Council’s promise to begin regulation of the crypto assets sector within the multi-national bloc.
She added that recent events, including the fall of the American crypto exchange FTX over the past several months, confirmed the need to impose rules to protect Europeans who invested in crypto, as well as measures to prevent the misuse of crypto assets for money laundering or funding terrorist activities.
What Does MiCA Entail for Crypto Firms and Investors
Under MiCA, crypto-centric firms like wallet providers and exchanges are now required to obtain a license to operate within the European Union. Stablecoin issuers, on the other hand, need to hold suitable reserves.
MiCA’s primary features were agreed upon in a political sense back in June 2022, but a number of administrative factors kept pushing it to the back burner until recently.
The regulations take effect in a little over a year from the date these are published in the EU’s official journal in either June or July.
Later in the day, ministers also agreed on new measures to force crypto providers to disclose details of their customers’ holdings to tax authorities, which will be shared within the bloc in a bid to avoid stashing funds in secret overseas wallets.
Referred to as DAC8, these crypto tax regulations were proposed by the European Commission last December. These are based on a model developed by the Organization for Economic Cooperation and Development (OECD) and its latest draft was released on Friday, May 12th.
However, it is unlikely that DAC8 will be passed into law any time soon, as the European Parliament has yet to give a non-binding opinion regarding the matter.
But for Economy that Works for People executive vice-president Valdis Dombrovskis, DAC8 is a necessity in light of Europe’s transition into the digital economy. Dombrovskis explained that, as crypto assets can play a major role in both innovation and economic activity, these also carry the risk of reducing financial transparency which could lead to either fraud or tax evasion. In this case, regulations like DAC8 would be a great help to member nations to more efficiently – and prudently – collect taxes from those investing in digital assets.