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EU and US propose legislative changes regarding digital asset industries

Sep 30, 2020

Recently European Union (EU) and United States (US) brought legislative changes regarding cryptocurrency industry.

New set of rules for crypto industry in EU known as the Markets in Crypto-Assets (MiCA) was introduced online. The draft was introduced by European Commission and the draft legislation purpose is to provide legal clarity around cryptocurrencies (including security tokens and stablecoins) that is in line with Europe’s Markets in Financial Instruments Directive (MiFID), which is a legal framework for securities markets, trading venues, and investment intermediaries.

Approximately the very same time, US Conference of State Bank Supervisors (CSBS) announced the launch of MSB Networked Supervision, a set of compliance guidelines for large Money Service Businesses (MSBs) in the US. These guidelines will standardize compliance procedures across states, which allows for state-licensed money transmitters to achieve compliance in multiple states at a time. No doubt that these legal frameworks could have big impact for global cryptocurrency market and seemingly they look similar, but there are important differences which can lead to which can be distinguished US and EU point of view on cryptocurrencies.

The MiCA and the CSBS’ program goal is to provide base for regulatory consistency across jurisdictions and both regulation purposes are to provide standardization, but the most important part of the rules is the European Commission’s objective to passport these standards across the borders of the EU. MiFID draft itself acknowledges the disparate state of crypto regulations in the EU.

Few EU Member States have already implemented this regime to cover some crypto asset service providers or parts of their activity, but in most Member States they operate outside any regulatory regime. In addition, an increasing number of Member States are implementing bespoke national frameworks to cater specifically for crypto-assets and crypto-asset service providers.

The draft determines that through the introduction of a common EU framework, uniform conditions of operation for firms within the EU can be set, overcoming the differences in national frameworks, which is leading to market fragmentation and reducing the complexity and costs for firms operating in area.

The CSBS’ new guidelines are not only for crypto firms, but for regulated money service businesses (MSBs). While the MiCA introduces set of laws and legal taxonomy for the crypto industry, whereas the CSBS’ new program mainly deals with compliance measures.

New program only applies to money transmitters operating in 40 or more states, which could outcompete smaller companies. While the US seems to be making things easier for the largest firms in its domestic crypto industry the EU moving toward a more comprehensive regulatory strategy – one that could foster innovation from the ‘bottom-up.’

MiCA draft indicates that the EU considers a digital assets industry as a crucial part of its economic future, unlike language that has been largely absent from any of the US statements or guidelines on digital assets. MiCA puts emphasis on digital assets development in order to build sustainable future-ready economy for people. One of the main purposes for MiCA is to set EU as a global leader in the digital assets industry. EU financial sector aims to ensure that the EU embraces the digital revolution and drives it with innovative European firms in the lead, making the benefits of digital finance available to European consumers and businesses. This only means that if the EU does take aggressive steps toward comprehensive crypto regulation, the US may have no choice but to up its game. The EU appears to be on track to adopt and implement the digital asset regulations by 2024.

This strategy may inspire other world governmental authorities to begin taking their local digital assets industries more seriously.

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