- The European parliament has approved the world’s first set of comprehensive rules to bring largely unregulated cryptocurrency markets under the ambit of regulation by government authorities.
- The regulation is called the Markets in Crypto Assets (MiCA)
Need of the regulation
- About 22% of the global crypto industry was concentrated in central, northern, and western Europe, which received $1.3 trillion worth of crypto assets.
- Having a comprehensive framework like MiCA for 27 countries in Europe not only harmonises the crypto industry but also gives the EU a competitive edge in its growth
- 2022 saw some of the biggest failures and wipeouts in the crypto industry involving bankruptcies and fraud scandals
What assets are covered under MiCA
- It will apply not only to traditional cryptocurrencies like Bitcoin and Ethereum but also to newer ones like stablecoins.
- As for the assets that will be out of MiCA’s scope, it will not regulate digital assets that would qualify as transferable securities and function like shares or their equivalent and other crypto assets that already qualify as financial instruments under existing regulation.
- It will exclude non fungible tokens (NFTs).
- MiCA will also not regulate central bank digital currencies issued by the European Central Bank and digital assets issued by national central banks of EU member countries when acting in their capacity as monetary authorities, along with crypto assets-related services offered by them.
What are the regulations
- MiCA will impose compliance on the issuers of crypto assets, who are defined as the “legal person who offers to the public any type of crypto-assets”
- The regulation prescribes different sets of requirements for Crypto Asset Service Providers depending on the type of crypto assets. The base regime will require every CASP to get incorporated as a legal entity in the EU.
- They can get authorised in any one member country and will be allowed to conduct their services across the 27 countries.
- They will then be supervised by regulators like the European Banking Authority and the European Securities and Markets Authority.
- Those stablecoin firms pegged to non-euro currencies will have to cap their transactions at a daily volume of €200 million ($220 million) in a specified region.
- Another legislation passed with MiCA requires crypto companies to send information of senders and recipients of crypto assets to their local anti-money laundering authority, to prevent laundering and terror financing activities.
Crypto regulation in India
- India is yet to have a comprehensive regulatory framework for crypto assets
- The Indian government has taken certain steps to bring cryptocurrencies under the ambit of specific authorities and taxation.
- In the Union Budget for 2022, the Finance Ministry imposed a 30% tax on income from the “transfer of any virtual digital asset.”
- The government placed all transactions involving virtual digital assets under the purview of the Prevention of Money Laundering Act (PMLA).
- However, the legality of cryptocurrencies in the country is still a grey area.
- India is now calling for consensus in the G20 grouping, to have a globally coordinated policy response on crypto assets that takes into consideration the full range of risks, including those specific to emerging markets and developing economies.