One more step towards a unified regulation of stablecoins | The agreement between the Council and the European Parliament has been reached

On 30 June 2022, the Council Presidency and the European Parliament finally reached the agreement on the Proposal for a Regulation on Markets in Crypto-assets (MiCA), amending Directive  2019/1937. The proposal was introduced on 24 September 2020 and aims to regulate the activities of issuers of unsecured crypto-assets (stablecoins), as well as trading platforms and portfolios in which crypto-assets are held. Obligations of supervision, transparency and authorisation of cryptocurrency transactions will be placed on CASPs (Crypto-asset Service Providers). The NFTs (Non-Fungible Token) are excluded from the regulation, at least at this stage.

This proposal for a regulation is part of a digital finance package that includes the digital finance strategy, an act on digital operational resilience (DORA), and a proposal on a pilot scheme on distributed ledger technology (DLT) for wholesale use. This package is designed to ensure the use of new digital financial instruments that comply with financial regulation and operational risk agreements of companies operating in the European Union.

The objectives the proposal of regulation are:

(a) transparency and disclosure requirements for the issuance and admission to trading of crypto-assets;

(b) the authorisation and supervision of crypto-asset service providers and issuers of asset-referenced tokens and issuers of electronic money tokens;

(c) the operation, organisation and governance of issuers of asset-referenced tokens, issuers of electronic money tokens and crypto-asset service providers;

(d) consumer protection rules for the issuance, trading, exchange and custody of crypto-assets;

(e) measures to prevent market abuse to ensure the integrity of crypto-asset markets.

The EU regulation, therefore, once again proves to be aimed at protecting consumers, who should receive adequate information on the risks, costs and burdens associated with MiCAs. In particular, the information in the marketing communications shall be:

(a) clearly identifiable as such;

(b) be fair, clear and not misleading;

(c) consistent with the information in the crypto-asset white paper, where required;

(d) clearly state that a crypto-asset white paper has been published and indicate the address of the website of the issuer of the crypto-assets concerned.

In addition, cryptocurrency service providers will have to comply with requirements aimed at protecting consumers' wallets, including assuming liability in the event of the loss of investors' crypto assets. Holders of stablecoins will be able to request a refund from the issuer at no additional cost and at any time.

It is difficult to imagine the significant environmental impact that cryptocurrencies produce. In this regard, the Regulation stipulates that operators will have to declare information on their environmental and climate footprint. The European Securities and Markets Authority (ESMA) will then be responsible for drafting regulations on how this information should be presented.

There are also plans to prevent money laundering activities by entrusting the EBA (European Banking Authority) with the task of keeping a public register of non-compliant cryptocurrency services.

The 30 June agreement emphasises that crypto asset service providers will only be able to operate in the EU territory with an authorisation issued by national authorities. As far as major crypto-asset service providers are concerned, national authorities will regularly transmit relevant information to the European Securities and Markets Authority (ESMA).

Marina Rallo

is a PhD Student at the LUMSA University of Rome.