European Parliament backs rules to regulate crypto assets

The European Parliament on Thursday overwhelmingly backed the European Union’s first set of rules to regulate crypto asset markets but opinion about the future of the asset class and its utility within the broader financial system remains divided.

The parliament voted 517 in favour of the Markets in Crypto Assets (MICA) regulation and 38 against to approve the world’s first comprehensive set of regulations for issuing and trading crypto assets such as bitcoin.

“This regulation brings a competitive advantage for the EU,” said Stefan Berger, the legislator who steered the rules through parliament. “The European crypto asset industry has regulatory clarity that does not exist in countries like the US.”

EU states have already given the nod to the rules which will be rolled out from mid-2024, requiring firms that issue and trade crypto assets to be licensed by a national regulator, giving them a “passport” to serve customers across the 27-member country bloc.

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“I hope that our rules could become a model for other countries,” the EU’s financial services commissioner, Mairéad McGuinness, said in a debate on the rules on Wednesday.

Other MEPs were more equivocal about the passage of the regulation. In the debate, Sinn Féin MEP Chris MacManus, who helped negotiate the regulation and acted as shadow rapporteur on the proposal, said he had “zero interest in creating a market or in fostering the use of crypto assets as the commission has stated it wishes to do”.

Mr MacManus said: “My support for these rules is based on the fact that this legislation brings transparency, protects consumers and aids financial stability.

“At their worst, crypto assets can be pyramid schemes; they are used by criminal gangs for money laundering and to defraud working people and they can waste huge amounts of energy for no purpose. In short, I see little or no social or economic benefit to these tools of speculation.”

The conflicting views of legislators reflect a wider debate about the utility of crypto, its potential role within the financial system and the security of an asset class seen as prone to dramatic swings in both price and interest.

Speaking on a panel at Bloomberg’s New Economy event in Dublin on Thursday, Matt Sekerke, president of New York-based strategy firm Ndogenous, said crypto “as it currently exists has very little role to play in the financial system, and some kind of full-scale reconstitution of the space may be necessary in order to integrate it”.

He said: “Crypto as a product, one of its primary selling point seems to be to operate outside of legal channels for certain users. And it also, in discussions around regulation, seems to be assumed that no regulations apply to it and that we need to sit down and write these things for the first time to figure out how to how to govern the space. Whereas other things that serve the functions that crypto does, or purports to serve, are already covered by a wide variety of regulations.” – Additional reporting: Reuters

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