| Last week, EU lawmakers agreed to extend the scope of their anti-money laundering rules to crypto assets and then announced a regulatory framework plan for digital assets.
The first new rule is called the transfer of funds regulation, or TFR, which would require crypto service providers to collect and share personal information and submit it to authorities as required for digital asset transfers. There is no limit to the transaction size, but the rule does not apply to peer-to-peer transfers.
Following the TFR announcement, lawmakers then announced Markets in Crypto-Assets, or MiCA, which seeks to protect investors and at the same time encourage innovation in the EU. MiCA specifically targets stablecoins by requiring issuers to hold reserves at a ratio of 1:1, with supervision for the coins by the European Banking Authority. The rule will not apply to non-issued tokens, such as bitcoin.
If these measures—which need to be approved by both the Council and European Parliament before being formally adopted—are passed, European regulators will gain tremendous power over the industry. ESMA—the European Securities Market Authority—will be able to ban or restrict crypto platforms that are not adequately protecting investors or threatening financial stability.
Interestingly, EU lawmakers also referred to the “Wild West,” echoing SEC Chair Gary Gensler’s description of the crypto markets. However, a recent Supreme Court ruling—while not directly related to crypto—may have an impact on future enforcement in the States.
The ruling—West Virginia vs. EPA—involved the Environmental Protection Agency’s ability to regulate air pollution. The high court ruled that the agency lacks the authority to regulate carbon dioxide emissions without seeking authorization from Congress.
This impacts crypto at a time when regulators try to force existing regulations onto digital assets as it limits how far any federal agency exerts authority outside of Congressional control.
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