The European Council has approved the Crypto Asset Markets Act (MiCA) and published the current version, but this is not the final step. The Council is mainly composed of the Heads of State of the member countries. The European Parliament still has to have its last word.
The parliamentary committee on the economy will then meet on October 10, when a vote is expected. After that, it will go to the rest of Parliament.
MiCA divides cryptoassets into electronic money (stablecoins), tokens backed by assets that include stablecoins backed by other assets, and everything in between. Legislation on e-money and asset-based tokens comes into force 12 months after the bill is approved. And everything else applies 18 months later. So that means stablecoins in early 2024 and the rest in mid-2024.
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Various regulators are responsible for writing detailed rules. It is mainly EBA for electronic money and ESMA for the rest.
There has been some fuss over caps on foreign currency-linked tokens. In reality, the limit of 1 million daily transactions or 200 million euros concerns all tokens referenced to assets not considered as electronic money. So that would cover MakerDAO’s DAI in Europe. And if everyone started paying in gold-backed tokens, that would include these. That’s about all that’s considered a threat to monetary sovereignty.
The legislation includes algorithmic stablecoins but does not cover DeFi, NFTs and lending. Reports on these three topics will be published within 18 months of promulgation. In addition, there will be an additional report on “services associated with the transfer of e-money tokens”.
Non-fungible fractional tokens are covered, as fractions are considered fungible.
Although the loans are not covered, they are somewhat
Although not within its scope, the legislation has a significant impact on loans with clauses that have been included since early versions.
There are clauses that issuers of e-money and tokens referenced by assets cannot pay interest, nor can crypto service providers. Interest is defined quite broadly as almost any additional benefit. For example, if a crypto exchange gave users their own token, that would count. A significant portion of crypto lending involves stablecoins, which would prevent centralized lending. This may not apply to DeFi loans, given the lack of an identifiable crypto service provider.
In the past, crypto lender Nexo had an interesting way around similar e-money rules. If a user paid in currency, they received a kind of stablecoin, except that it was not exchangeable externally. We believe that e-money rules do not apply if it is an internal platform.
Meanwhile, another major piece of legislation covering tokenized securities has been passed. The so-called DLT pilot scheme allows blockchain-based financial market infrastructures to operate with some limited legal derogations and will come into force in March 2023.
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EU Crypto Legislation MiCA Gets A Little Closer. Impact On Lending – Ledger Insights Tech Tribune France
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