EU’s Markets in Crypto Act

April 24, 2023

The European Union’s legislature has granted final approval to the Markets in Crypto Assets (MiCA) regulations, which are the new common rules for the crypto space in Europe. The MiCA will regulate the supervision, consumer protection, and environmental safeguards of digital assets, including cryptocurrencies like Bitcoin.

MiCA aims to reduce the carbon footprint of cryptocurrencies and counter the risks of market manipulation, money laundering, and terrorist financing. Larger service providers are obliged to disclose their energy consumption, and licensing for crypto service providers operating in the bloc is introduced. A register for non-compliant companies will also be established.

Regulatory clarity for the EU

The MiCA would protect consumers against fraud and allow the sector to regain trust. It would put the EU at the forefront of the token economy with 10,000 different crypto assets. MiCA will become effective after receiving formal endorsement from the Council and 20 days after being published in the EU Official Journal.

Tracing of crypto transactions

In a separate vote, the European Parliament passed supplementary legislation allowing the tracking of cryptocurrency transactions. The purpose of this legislation is to ensure that transfers of cryptocurrencies can “always be traced” and blocked if they are found to be suspicious. Transfers of crypto assets are subject to the “travel rule” from traditional finance, which mandates that details about the source of the asset and its beneficiary must accompany the transaction and be recorded on both ends.

Self-hosted wallets and exemption rules

The provisions will also cover transactions from crypto addresses of private users, the so-called “self-hosted wallets,” if they exceed €1,000 (approx. $1,100) in fiat equivalent and when they transact with “hosted” wallets managed by service providers. Exceptions to the rules include transfers conducted directly between individuals, transfers that do not involve a service provider, and transfers made between providers who act on their own behalf.

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