The European Parliament passed bills to regulate cryptocurrencies

The European Parliament approved the bill on tracing cryptocurrencies and digital tokens and the bill on supervision, consumer protection and mandatory provision of cryptoassets (MiCA). If the bills are approved by the Council of Europe, then 20 days later the bills will officially enter into force.

Back in October 2022, the European Union reached a consensus on the regulation of crypto-asset markets (MiCA).

The regulation aims to ensure that cryptocurrency transfers are tracked like any other transaction and that suspicious transactions are blocked.

Definition of a crypto asset in MiCA

A crypto asset is defined as “a digital representation of value or rights that can be transferred and stored electronically using distributed ledger technology or similar technology.” The bills make a distinction between "cryptocurrencies" on the one hand and "tokens" on the other. It also establishes requirements for crypto asset issuers and crypto asset service providers (CASPs). Issuers of crypto assets must provide complete and transparent information about the crypto assets they issue and comply with disclosure and transparency rules. Crypto asset service providers must be registered and apply security measures and comply with anti-money laundering requirements.

Classification of crypto assets in MiCA

The bill provides a regulatory framework for digital assets using decentralized ledger technology (DLT). The main crypto assets covered by the acts:

1. Asset-linked tokens (ART). This category includes all crypto assets that do not qualify as "electronic money tokens", which are designed to maintain a stable value by referring to the value of fiat currency, which is legal tender. An example of this is Digix (DGX) backed by an equivalent amount of physical gold stored in a secure vault.

2. Electronic money tokens (EMTs), which are designed to maintain a stable value by referring to the value of fiat currency, which is legal tender. The difference between ART and EMT lies in the configuration of the underlying asset that supports the price. ARTs use non-cash assets or a basket of currencies, while EMTs use a single currency, which brings them closer to the concept of electronic money.

3. Crypto assets that are not considered ART or EMT, such as "utility tokens", which are intended to provide digital access to a good or service available in DLT and are only accepted by the issuer of that token. Unlike security tokens, they are not considered a financial instrument under the securities laws of many countries.

For more information about the acts, please follow the link: https://www.europarl.europa.eu/RegData/commissions/econ/inag/2022/10-05/ECON_AG(2022)737216_EN.pdf

Nadmitov, Ivanov & Partners Law Firm actively advises clients in the field of financial technologies. Among our clients are leading foreign companies in the field of cryptocurrency mining, ICO platforms, fintech startups, payment systems and banks.