New cryptocurrency rules in the European Union


Cryptocurrency will soon be subject to special legislation in the European Union. Indeed, the European Parliament recently approved the first piece of EU legislation for tracing transfers of crypto-assets. This is the first step towards the adoption of the Regulation on information accompanying transfers of funds and certain crypto-assets, proposed by the Commission in 2021.

The proposed Regulation includes the introduction of the travel rule in the field of crypto assets. This would allow crypto-institutions to share information with one another on electronic transfers in order to ensure a safe journey. The aim is to ensure the possibility to trace transactions and to block any suspicious kind. It is a significant measure, as it effectively subjects crypto-assets to the same rules as traditional ones.

The Regulation on transfers goes hand in hand with MiCA, the Regulation on markets in crypto-assets, set to enter into force next year. MiCA aims to ensure a coherent legal framework for those crypto-assets not covered by existing financial services legislations, thus protecting players, especially consumers and investors, and promoting integrity and financial stability in the internal market. For this to happen, MiCA introduces rules of disclosure and transparency.

These measures fit in the broad digital transformation strategy the EU is carrying out in order to make Europe fit for the digital age. While promising and innovative, crypto-assets carry a large number of risks. If not regulated, they can have a severe impact on consumers, the environment and the EU internal market, thus compromising the mission of the Union. This is why it is necessary for the Union to act towards the creation of an efficient legal framework.

These measures come after years of debate over crypto-assets. Indeed, not only do new types of assets need to be studied thoroughly from a legal and economic perspective, but they also have to be given time to evolve without restrictive laws. It remains an open question whether these laws are, indeed, too restrictive. Something is certain: thanks to the new transparency obligations, cryptos won’t anymore be a safe space to hide for those who wish to remain anonymous.

In the meantime, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) are working on the technical standards and guidelines that will implement certain provisions of the regulation. Time (and implementation) will tell if these measures can effectively regulate crypto markets, without squashing their potential.

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