Earlier in the week, the European Union agreed towards what it called protecting the financial stability and transparency in cryptocurrency transfers by subjecting the market to money-laundering protocols.
The first provisional agreement ruled on the tracing of crypto assets transfers like the bitcoin, to put to an end illicit transfers and block transactions suspected to be proceeds from money laundering.
The regulations aren’t new in traditional banking transfers and may just be the beginning of further regulations in Europe.
And cryptocurrency is now being accepted in other parts of the world, the EU seems to have just set a precedent for other countries.
This step comes at a time when the cryptocurrency industry is experiencing the highest drop in price. If the outcries aren’t addressed, the eroding market confidence could trigger further price-plunge and loss of fortunes.
These regulations and other rules are expected to be agreed upon by the twenty-seven member nations before the coming week.
The further move will target to seal the loopholes for fraud, scams, market manipulation, and terrorist financing.
“The EU rules are really the first comprehensive piece of crypto regulation in the world,” said crypto venture adviser at Presight Capital, Mr. Patrick Hansen.
According to Mr. Hansen, other countries will have to interrogate the rules, pick what works for them and fill in voids rather than creating their own from scratch.
“I think there will be a lot of jurisdictions that will look closely into how the EU has dealt with it since the EU is first here,” he further said.
Once in effect, the EU regulations crypto traders and brokers will have to abide by the stringent rules as long as they will continue operating under Markets in Crypto Assets (MiCA).
For instance, to enhance transparency in crypto assets, crypto companies will now be required to disclose all information to their customers regarding the costs, charges, and risks of such assets.
This is because, unlike ordinary cryptocurrencies, crypto assets such as stablecoins have fewer fluctuations in value due to their tie with the dollar and gold. Bitcoin-related services (not bitcoin) will also face the same regulations.
By maintaining the financial stability of crypto trading the regulators will be averting crypto-related crashes as have been experienced in the last months.
A recent example is the sudden collapse of stablecoin TerraUSD, wiping out investor fortunes worth $40 billion with no party taking responsibility.
The crypto crash sparked calls to regulate the industry, with other major nations like the US and the UK burning the midnight oil to strategize on the enactment of crypto regulations as soon as possible.
In March, U.S President Biden issued an executive order on government regulations, including establishing the effects of cryptocurrency on national security besides financial stability.
And in response to that order, California state formally joined hands with the federal government in crafting regulations for the adoption of cryptocurrency.
“For too long, crypto-assets have been under the radar of our law enforcement authorities,” Assita Kanko, an EU lawmaker negotiating the crypto rules, said in a statement.
“It will be much harder to misuse crypto-assets and innocent traders and investors will be better protected.”
While some EU nations have some form of cryptocurrency regulations, its the objective of the EU negotiators to come up with standard rules to be applied by member states.
For example, the rules will require storing information on both the sender and the beneficiary of crypto assets.
After finalizing the technical details, the EU institutions will submit the crypto tracing regulations for final approval and are expected to take effect by 2024.
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