Leaked Europe draft legislation provides legal certainty around cryptocurrency, security tokens and stablecoins

It seems that Europe’s Markets in Crypto-Assets (MiCA) draft legislation is geared toward trading or releasing cryptocurrency across 27 countries. The draft law also shows that the European Commission is looking to attract the interest of stablecoins, among other planned regulations.

Cryptocurrency and Stablecoins are poised to receive more scrutiny from the Commission

Stablecoins are poised to receive more oversight from the Commission, with a proposal in favor that they are subject to stricter requirements than other cryptocurrencies. And the reason is straightforward, given their ability to manipulate finance the equivalent of fiat value transferred across borders.

For this reason, the Commission is proposing a European Union-approved authority to review the whitepapers on stablecoins before the issuer gives the green light to distribute tokens. This wouldn’t apply to coin offerings only open to qualified investors.

But some stablecoins will still be exempt from testing. Algorithm tools are of less interest because their stability is protocol-based instead of being tied to a fiat currency or basket of such currencies. But for fiat-pegged tokens, the EBA could start charging issuers fees to cover its costs. It is also seeking to prohibit the issuer-issued interest on tokens.

The draft proposal stated:

“Issuers of e-money tokens, and any crypto-asset service providers, should be prohibited from interests to holders of e-money tokens for the length of time such holders are holdings the e-money tokens.”

Besides, Siân Jones, senior partner at XReg Consulting, added:

“By making crypto just like everything else in the traditional world, you make it easier for the traditional world to accept it. I would probably say from the draft that it will favor the banks and traditional investment firms. The incumbents will have an advantage in several respects, which I’m sure is not the intention, but that will be the short- to medium-term impact. ”

The 168-page set of draft rules, which Brussels said would come out in September, will not likely be transitioned into EU law until 2022 at the earliest. As an EU regulation, it will be directly applicable throughout the EEA without the need for national legislation.

Europe’s Markets in Crypto-Assets (MiCA) draft legislation provides legal certainty around crypto-assets – cryptocurrency, security tokens, and stablecoins – along the same lines as Europe’s Markets in Financial Instruments Directive (MiFID), a legal framework for securities markets, investment intermediaries, and trading venues.

The takeaway is that Europe intends to treat crypto the same as any other regulated financial instrument, which will doubtless provide legal clarity. The unknown is whether that may stifle this nascent and fast-moving space.

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