EU’s parliament has approved the world’s first comprehensive regulation on cryptos on April 20, 2023. There are issues with cryptos on account of their anonymity because of which they are not traceable. It encourages tax evasion, money laundering, financing of illicit trade and activities, including terrorism. At the same time, there has to be protection of the consumers as far as crypto dealings are concerned. The FTX exchange tragedy calls for attention to this aspect. Volatility of crypto assets does affect the stability of the financial system. Thus all this calls for regulation of cryptos.
Europe approved Markets in Crypto Assets (MiCA) legislation to ensure that crypto transfers are always traceable and suspicious transactions are blocked. These are applicable to Crypto Asset Service Providers (CASPs). The transfer of crypto assets should be accompanied by information on the originator (name, wallet address/crypto asset account, address, country), official personal document number, customer identification number or date and place of birth.
At the beneficiary end, information to be disclosed includes name, wallet address/crypto accounts.
If the transfer is not from account to account the originator should ensure that the transfer of cryptos is accompanied by unique transaction identifier (UTI) and records originator and beneficiary address identifiers on the distributed ledger.
Crypto asset transfers should rely on suitable technological tools which facilitate identification of individual transfers.
CASPs should be incorporated within the EU as a legal entity.
Thus the travel rule of traditional finance will apply to crypto transfers. There is record of the transaction at both the sides — originator as well as beneficiary side.
There are measures against market manipulation and curb the dubious activities in the law. It envisages a public register under the European Securities Markets Authority for non-compliant asset providers (operating without authorisation).
Service providers must disclose their energy consumption. It would also cover transactions above 1000 euros from self-hosted wallets when they interact with hosted wallets of CASPs.
CBDCs are not covered under this law.