EU Lawmakers to Discuss Crypto Regulation
This week, members of the EU Parliament and the European Commission and representatives of the member states will continue the negotiations regarding the scope of the Markets in Crypto Assets regulation (MiCA), according to CoinDesk.
Meetings will take place on Wednesday and Thursday, a week before the EU Parliament hosts the last plenary session before the summer recess and a few days before France hands the presidency of the EU Council over to the Czech Republic. Many lawmakers, and especially the French government, which has been pushing for the adoption of MiCA during its term, will be hopeful that the parties could reach an agreement on several issues during these meetings.
The topics to discuss about MiCa are still plenty, but talks this week are likely to focus on two issues, according to CoinDesk: how to treat non-fungible tokens (NFTs) and the private use of unhosted wallets.
On Wednesday, EU negotiations will talk about anti-money laundering provisions in the so called “travel rule” for crypto assets. The EU Parliament approved in March a proposal that increased the information requirements that crypto asset providers will need to collect and share for each transaction, regardless of the amount transferred. There is still room for changes, if needed, as the EU parliament approved its negotiating position with the other institutions, but parliament and council could still amend the legal text. This could include the application of the travel rule to wallet providers as well as crypto exchanges, which may be part of the conversation this week.
Ajinkya Tulpule, chief compliance officer at crypto exchange bitFlyer, told PYMNTS in an interview that the parliament decision to apply the travel rule to any crypto transaction seems excessive, but it is nonetheless likely to be approved. “A lot of exchanges have lobbied hard against it, as you can imagine, but from what I heard from a chat with an MEP recently, the majority of the MEPS are in favor of removing the threshold. So it’s not great news,” Tulpule said.
The main issue to be resolved is how to treat transfers made to and from “unhosted wallets,” which are private means of storing crypto assets that aren’t managed by a regulated service provider. Proponents say that the final text will uphold the principle of verifying customer identity, but this approach presents challenges. Other details to discuss may be the monetary threshold that would trigger reporting, which could differ from that of other crypto exchanges, and if the details of both sender and receiver should be disclosed or only one of them.
The second topic for EU negotiators is whether the scope of MiCA should be extended to cover NFTs, which were left out of the original draft. Yet, since then, these digital assets have grown in popularity — and so have scams involving NFTs. This kind of abusive behavior brought the attention of regulators, and in May, Mairead McGuiness, European Commissioner for financial services, already hinted at the possibility of regulating NFTs — not only at the EU level, but on a global scale. Even France, as president of the EU Council, drafted a paper considering the inclusion of NFTs in the EU regulation.
Read more: EU May Change Crypto Regs to Include NFTs
If NFTs are included in the scope of MiCA, marketplaces like OpenSea would need to be authorized, and most of the NFT service providers would also need to register. To reduce this burden, there could be exemptions for artists who offer wallet services for their own creation and for markets with low volumes, but the general rule is that NFT providers should seek registration.
Alternatively, and given the pressure to pass MiCA, lawmakers could leave some of these and other issues (like decentralized finance) for a second version of MiCA. “We would hope that you can also look at MiCA 2,” the European Central Bank’s Christine Lagarde told lawmakers at the European Parliament on June 20, calling for an additional law on crypto staking and lending, as well as activities where there are no intermediaries or identifiable issuers.