EU lawmakers hammer out new crypto rules

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EU lawmakers hammer out new crypto rules

Under the new rules agreed by the bloc to tame a volatile Wild West market, a licence and customer safeguards will be required to issue and sell digital token in the European Union.

National operators in the EU are only required to show controls for combating money laundering, with largely unregulated assets in the world.

Representatives from the European Parliament and EU state thrashed out a deal late on Thursday on its Markets in Crypto-assets MiCA law.

Stefan Berger, a German centre-right lawmaker who led negotiations on behalf of the parliament, said today we put order in the Wild West of Crypto assets and set clear rules for a harmonised market.

Berger said that the recent fall in the value of digital currencies shows how risky and speculative they are and that it is fundamental to act.

The collapse of the terraUSD stable coin and the freezing of withdrawals and transfers by major U.S. cryptocurrencies have caused a drop in the markets of the digital currency this year.

Since November of last year, the biggest token,Bitcoin, has slumped some 70%, dragging down the overall market.

The EU's role as a standard-setter for digital issues is confirmed by the landmark regulation, according to EU states.

They added that the service providers of cripto-assets will have to respect strong requirements to protect consumers' wallets and be liable if they lose investors' crypto-assets because of the new rules.

The deal will need formal rubber stamping by the European Parliament and EU states to become law, followed by an implementation period.

The new law allows issuers of cryptocurrencies assets and providers of related services a passport to serve clients across the EU from a single base.

Holders of stablecoins - a type of criptocurrency designed to hold a steady value - will be offered a claim at any time and free of charge from the issuer, with all stablecoins supervised by the bloc's banking watchdog EBA.

According to Kopitsch, secretary general of the Blockchain for Europe lobby group that includes the major exchanges Binance andCryptocurrencies, the rules are a mixed bag thanks to last minute changes, and we fear that stable coins will have no way to be profitable, Kopitsch said.

AFME, a financial markets industry body, said the rules would bring certainty, reduce fragmentation and underpin the development of a robust and well-functioning market.

More clarity is needed to make sure that custodians of cryptocurrencies are only on the hook in cases of negligence or misconduct, and not for events beyond a custodian's control, such as a nation state hack, AFME said.

Finance Watch, which promotes public interest in finance, said the rules will protect consumers, and it welcomed the new role of the EBA after the difficulties faced by stablecoins.

Many states, including Ireland, Lithuania and Greece, have opposed including non-fungible NFTs, which are digital assets representing objects from art to videos.

Under pressure from EU lawmakers, a compromise reached on Thursday night says NFTs will not be included in the scope, except if they fall under existing cryptoasset categories. Brussels will assess within 18 months whether standalone rules are needed for NFTs.

The EU's securities watchdog ESMA will have to keep the national regulators informed about large operators, as they will be responsible for licensing cryptocurrencies firms.

ESMA will develop standards for companies to disclose information on their environmental and climate footprint.

The United States and Britain have yet to approve similar rules, and both have yet to do so.

The rules are a significant milestone, according to the company behind the USD Coin stable coin. U.S. firm Circle said in a blog that while no comprehensive body of rules is perfect, it nonetheless provides practical solutions to issues that other jurisdictions are just beginning to grapple with.