It was less one for the French presidency of the European Union, which had made it one of its objectives and ended on June 30. On Wednesday and Thursday, the presidency of the Council of the EU and the European Parliament reached a provisional agreement on the MiCA crypto-assets regulation, and the TFR remittances regulation, with regard to money laundering and terrorist financing, after several months of negotiation. Bercy declared himself satisfied with the final agreement.
Linked together, these two texts create a harmonized framework for the regulation of crypto assets for the first time. They have yet to be confirmed by the Council and Parliament before being formally adopted. They are, unlike directives, of a regulatory nature and directly applicable in EU countries.
European PSAN: Capital Requirements
The MiCA Regulation defines different categories of crypto-assets and their oversight framework. It is inspired by the French regulation on digital asset providers (PSAN) to regulate market players, such as trading platforms. These require a license to operate within the EU, similar to the French approval procedure which, in addition to the registration procedure currently used by all NASPs, imposes financial restrictions. The licenses will be issued by the national authorities, but the European authorities will be involved in the supervision of players of significant size.
European PSANs will “Now held responsible for loss”, says a European Council press release, to better protect investors. However, the extent of this liability is unclear in the case of hacking, for example.
Stablecoins: minimum liquidity reserves
Specifically, the regulation concerns stablecoins, these cryptocurrencies backed by “fiat” currencies, which it will impose on their issuers “constitute a sufficient liquid reserve, with a ratio of 1/1 and partly in the form of deposits”† Any stablecoin holder must be able to be redeemed at any time by the issuer, which imposes minimum liquidity reserves.
Stablecoins will be supervised by the European Banking Authority (EBA). The development of stablecoins backed by a non-European currency “used as means of payment, will be restricted to preserve our monetary sovereignty”, says the Council. On June 30, the American company Circle (maker of the USDC) launched a stable euro coin, the Euro Coin.
NFT, environmental impact: up to 18 to 24 months
NFTs are currently not within the scope of MiCA. However, the text is designed to leave room for development, with the idea that it will have to evolve to adapt to the rapid changes in this sector. The European Commission will therefore have to assess within 18 months whether it is necessary to propose a specific regulatory regime for NFTs.
Likewise, within two years, it will have to provide a report on the environmental impact of crypto assets and the introduction of minimum standards regarding consensus mechanisms, including proof of work. In the meantime, the SAPNs will have to provide information on their environmental and climate footprints.
From the entry into force, the platforms will have 12 to 18 months to comply with the new regulations.
TFR: an extensive field of application
The TFR Regulation, for its part, updates the rules regarding information on transfers of funds by extending the scope of these rules to transfers of crypto assets. The aim is to require payment service providers to collect data on the sender and beneficiary of the transfers they process. “EU makes it harder to use cryptocurrencies for criminal purposes”, the Council explains. The application schedule will be aligned with that of MiCA.
In concrete terms, the TFR scheme will apply to all transactions with a PSAN, i.e. a centralized service provider, from the first euro. It will also apply to transfers between a decentralized wallet (not hosted) and a PSAN, from 1000 euros.
The scheme includes the collection of data on the identity of the parties to the transactions, data to be made available to authorities in the event of an investigation into money laundering or terrorist financing. PSANs will also have to verify that money transmitters are not subject to sanctions.
Only fully decentralized transactions (person-to-person, without intermediary) are not subject to the TFR regulation.