The planned framework of the European Union for the regulation of cryptocurrencies has come closer to an official step. On Wednesday, the Council of Europe, the EU’s political program guide, gave its stance on the Framework of Markets in Crypto Assets (MiCA) and the Resilience Act.
After the agreement, which then has to be ratified, the Council and the European Parliament can now start discussing the initiative before it finally enters into force.
The MiCA framework is designed to protect investors and consumers from fraud, including ensuring the safety of investor funds in the event of a hack. If the authorities believe that certain virtual currency exchange platforms pose a threat to investors or users, they can use the MiCA to impose stricter regulations on them.
The other main goal of MiCA is to regulate the issuers of stablecoins, in line with Facebook’s desire to establish a stablecoin, originally called “Libra”, backed by a basket of fiat currencies.
The European Central Bank (ECB) says the new rules will set equivalent cultural standards for payment service providers to keep users safe. According to the latest announcement by the ECB, the framework will also include provisions on corporate governance and risk management, as well as a ban on the provision of services such as high-risk payment instruments.
The Council of Europe’s own MiCA negotiating mandate, which is over 400 pages long, suggests that the EU will not loosen its stance on asset-based token issuers. It states that they are subject to stricter obligations than issuers of other crypto assets.
Several exclusions have been included in the negotiating power of the MiCA. The council agreed that tokens relating to assets authorized under the European Union’s Equity Directive should “not require any other authorization under” [MiCA] will be published. “According to MiCA, banks and other financial institutions that offer payment services for stablecoins must be exempted from capital requirements.
Related: Regulators are about to introduce stablecoins, but where should they start?
According to the council, non-fungible tokens, including digital art and collectibles, will be rated based on the unique properties and benefits of each crypto asset they offer. The rules do not apply to tokens that represent unique services or real estate, such as “product or real estate guarantees”.
The European Commission published the MiCA framework in September 2020 as part of its larger digital finance initiative.