The next 24 hours could prove crucial in determining how the European Union (EU) will regulate cryptocurrencies.
As the European Parliament moves towards finalizing its position on Europe’s Markets in Crypto Assets (MiCA) framework, the EU Council, made up of government ministers and other officials from member countries, will meet Friday to discuss how to treat non-fungible tokens (NFT), decentralized finance (DeFi) and the environmental impact of bitcoin-style assets.
UPDATE (March 25th, 11:36 UTC): EU's MiCA Bill Moves Forward Without Bitcoin Limiting Provision
The EU’s landmark MiCA regulation seeks to offer a single license for crypto providers to operate across the bloc’s 27 member countries, in exchange for measures intended to protect investors and safeguard stability.
But it will only pass into law if governments and lawmakers agree on an identical document, and there are several issues to be ironed out first.
First, the European Parliament needs to figure out how – and in particular whether it wants – to limit the use of proof-of-work methods used to validate bitcoin (BTC), a process which some worry consumes too much energy.
A report penned by EU parliamentarian Stefan Berger has already said that initial coin offerings should inform investors of the environmental damage in the “white paper” they must publish under MiCA – and Berger now seems confident there won’t be a mutiny from other lawmakers seeking more heavy-handed measures that could amount to a bitcoin ban.
“The deadline to challenge my trilogue mandate runs out at midnight,” he tweeted in German Thursday morning. “So far everything seems calm.”
Friday morning, the EU Council will meet behind closed doors to hammer out how Berger’s views differ from their own – and France’s officials seem relatively optimistic they can find common ground.
“The texts of the European Parliament and the Council converge to a great extent on the framework applicable” to the large-scale currency tokens that are most heavily regulated by the new law, said a document seen by CoinDesk, prepared by French officials ahead of that meeting.
In a position set out in November, ministers sought tight curbs on any attempt to issue assets that could be widely used as an alternative to regular fiat currency – a move likely targeted at the now-canceled Diem stablecoin project supported by Facebook (now Meta) and other industry players.
There may well still be squabbles over the exact roles of regulators like the European Banking Authority, the European Securities and Markets Authority and their national equivalents, said the French document. France currently chairs talks within the Council.
But there may also be disagreements over how to deal with innovations in a field that moves faster than lawmakers can.
“Member States might wish to discuss this issue again,” according to the French document, because DeFi “was still in full development at the time of negotiations.”
The framework also isn’t intended to cover non-fungible tokens (NFT) that can be used to prove ownership of assets like artworks. But, France concedes, if NFTs grant a right to a share of profits similar to conventional securities, they could be made subject to existing financial service laws on investor information and against market abuse.
But France also seems keen not to pile extra anti-money laundering (AML) rules on crypto service providers – suggesting those should be dealt with a separate, more general review of dirty-money laws that is now ongoing.
In February, leading members of the European Parliament proposed a blueprint for AML rules that would apply identity checks to all crypto transactions, even those worth under 1,000 euros.
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