The European Union (EU) published a report by the Economic and Monetary Affairs Committee (ECON) on the upcoming Markets in Crypto-assets Regulation Bill (MiCA Bill).
The MiCA Bill was initially announced in 2020 to expand cryptocurrency use to businesses throughout the EU. The MiCA Bill covers a variety of crypto-related topics with mixed reception from parliamentary members and the community. Most notably, the draft regulation includes three elements for ensuring uniformity in regulating cryptocurrency in the EU:
- A uniform legal framework
- The need to protect consumers and minimise market manipulation, and
- Including proof of work cryptocurrency mining with EU taxonomy for sustainable activities.
The first two elements have already been passed and are formally part of the MiCA Bill. EU lawmakers also recently pushed for additional, yet controversial measures, to track cryptocurrencies used in money laundering. The anti-money laundering provision will require the identification and purpose of any transaction greater than 1000 EUR. This means that any cryptocurrency exchange or service receiving more than 1000 EURs per transaction will have to report this to the EU Economic Commission. This tracking threshold was originally planned to be eliminated due to the low amount but now over 90 lawmakers have voted in favour of the proposal. Policymakers argue that this anti-money laundering threshold is designed to protect consumers and minimise market manipulation, but this may unduly put stress on the digital asset sector by eliminating any privacy through online transactions.
Presently, the third element is being discussed over the sustainability of proof of work mining. Bitcoin (and a few other assets) use computational mining to create more Bitcoins. This requires large electricity usage which has been argued to damage the environment. The third element aims to limit or ideally ban the use of proof of work mining in the EU. Despite the push for eco-positive cryptocurrency, proof of work mining is actually far more sustainable than lawmakers realise, generally relying on green energy.
The MiCA Bill has put the EU in the spotlight with its stark anti-crypto regulations. The EU must play this carefully as any drastic changes to digital assets and the ongoing Ukraine-Russia conflict could negatively impact the EU economy. It will be interesting to see how other nations react to MiCA Bill proposals and whether they will follow suit.
For the full reading of the Bill, see here.