European Parliament Committee Firmly Backs MiCA Crypto Framework with Overwhelming Vote

The landslide 28-to-1 vote by lawmakers of the committee paves the way for final approval of the Markets in Crypto-Assets (MiCA) framework by the full European Parliament before next year.

The vote by the European Parliament Committee on Economic and Monetary Affairs, or “ECON”, marks another significant step forward by European authorities to regulate crypto asset service providers in a more comprehensive manner. The vote by the committee, passed without further discussion of the legislation’s text, cleared the way for approval by the full European Parliament before the end of this year, according to CoinDesk and other outlets.

The MiCA proposal, first introduced to the European Commission in September 2020, aims to create a regulatory framework for cryptocurrency issuers and related service providers among the 27 EU member states. Member states reached a political agreement on MiCA last June and, over the summer, the states negotiated the technical details of the regulation. The regulation would allow providers of wallets, tokens, and other crypto services to market themselves across the EU if they register with respective national authorities and meet minimum guarantees intended to protect investors and maintain stability in crypto markets.

The proposal has four general and related objectives. The first is to create a “sound legal framework” for crypto asset markets to develop within the EU. The second is to “support innovation” by implementing a “safe and proportionate framework to support innovation and fair competition.” Since crypto assets are not currently covered by existing financial services legislation, the framework also seeks to “instill appropriate levels of consumer protection and market integrity” under a comprehensive regulatory regime. The final objective of the framework is to “ensure financial stability” in crypto markets, noting that the legislation seeks to address potential risks associated with emerging stablecoins.

The framework would require those issuing crypto assets to submit an application to the competent authority in their home member state before issuing any asset. It would also require issuers to publish a white paper containing information about their project. Among various other requirements, the white paper must disclose information related to the issuer’s governance arrangements, asset reserves, redemption rights, and technical information about the underlying crypto asset.

The regulation would also require stablecoin issuers to meet capital requirements, including restrictions on how many tokens they may issue if they are not denominated in euros or other currencies used by E.U. member states. Additionally, the legislation reaches crypto miners—requiring large “crypto-assets service providers” to disclose their energy consumption. The European crypto industry has generally welcomed the regulatory recognition, notwithstanding remaining debate over the restrictions it places on the use of stablecoins and uncertainties about whether the rules will apply to non-fungible tokens (“NFT”).

After legal and linguistic checks and the European Parliament’s approval of the latest version of the text, the MiCA framework will become effective between 12 and 18 months after publication in the EU’s Official Journal, which is likely to occur next spring. The regulation could be effective as early as 2024.

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