The world’s first complete set of regulations for the movement of cryptocurrencies like Bitcoin was approved by the EU Parliament last week as part of its effort to combat money laundering and illicit transfers within the Union. The so-called “travel rule” — which mandates that data on the asset’s origin and its intended recipient be transmitted along with the transaction and stored on both sides of the transfer will apply to all cryptocurrency transfers starting in 2024, regardless of their value.
The legislation mandates that businesses apply for licenses before they can issue, trade, or protect stablecoins, tokenized assets, or any other type of digital asset in the 27-nation bloc. “Recent events have confirmed the urgent need for imposing rules which will better protect Europeans who have invested in these assets, and prevent the misuse of the cryptocurrency industry for the purposes of money laundering and financing of terrorism,” said Swedish Finance Minister Elisabeth Svantesson.
The goal of MiCA, as the new rule is known, is to make sure that crypto payments inside the EU can be tracked in a manner similar to how regular bank transfers can be tracked. Additionally, they aim to safeguard investors by enhancing transparency and establishing a thorough framework for issuers and service providers, including adherence to anti-money laundering regulations.
Additionally, the European Securities and Markets Authority (ESMA) will have the authority to intervene and impose restrictions on crypto platforms if it appears that they do not adequately protect investors or pose a risk to the integrity of the market or the stability of the financial system.
The new regulations also mandate automatic information exchange between tax authorities and crypto-asset service providers. They do not, however, apply to transfers between individuals that take place between providers operating independently or without the involvement of a provider.
A blockchain record is used by cryptocurrencies like Bitcoin to track transactions. All transactions are recorded in a ledger that is open to the public, but only the user’s public key, not their actual personal information, may be used to track them. Although it entails a variety of concerns, this pseudo-anonymity is what first attracted many people to invest in cryptocurrencies.
According to Chainalysis, a website that offers data on blockchain technology, in 2022, the amount of bitcoin obtained either illegally or for groups or individuals to employ for illicit purposes—including terrorism and human trafficking—was just over $20 billion.
The technology also consumes a lot of electricity; it’s been said that bitcoin utilizes as much energy as a small nation.Currently, customers risk losing money while dealing with crypto-assets because they are not protected by EU consumer protection laws. The EU is also concerned that the widespread usage of cryptocurrencies may encourage financial crime, market manipulation, and instability in the financial system.
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