The European Union has agreed on ground-breaking rules for regulating crypto assets, according to EU lawmakers on Thursday, as the bitcoin crash piles pressure on authorities to rein in the sector.
Globally, crypto assets are largely unregulated, with national operators in the EU only required to demonstrate anti-money laundering controls.
Representatives from the European Parliament and EU member states hammered out an agreement on the markets in crypto assets (MiCA) law, which is set to go into effect at the end of 2023.
“Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market,” said Stefan Berger, the center right lawmaker who led negotiations on behalf of the parliament.
“The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act,” Berger said.
MiCA will be the first comprehensive regime for crypto-assets in the world and will contain strong measures to guard against market abuse and manipulation, added Ernest Urtasun, a Green Party lawmaker in the parliament.
The new law allows issuers of crypto assets and providers of related services to serve clients across the EU from a single location while adhering to capital and consumer protection regulations.
Similar rules have yet to be approved in the United States and the United Kingdom, two major crypto centers.
Following the collapse of TerraUSD and Luna tokens last month, crypto assets have been under pressure, with major US cryptocurrency lending company Celsius Network freezing withdrawals and transfers this month.
Bitcoin fell to around $17,600 this month and was trading around $18,900 on Thursday, well below its late March level of $48,200 as investors recoup losses.
On Thursday, discussions centered on issues such as cryptoasset supervision and energy consumption.
“We agreed that in the future, crypto asset providers should disclose the energy consumption and environmental impact of assets,” Berger said.
EU member states will be the primary regulators for crypto companies, though the EU’s securities watchdog, ESMA, will have the authority to intervene if investor protection or financial stability is jeopardized, according to lawmaker Urtasun.