As such, the European Council, which serves as the political arm of the EU, adopted the “markets in crypto-assets” (MiCA) framework to bolster transparency in the crypto space, protect investors and ensure compliance with anti-money laundering rules, according to the council’s announcement of the decision. “I am very pleased that today we are delivering on our promise to start regulating the crypto-assets sector. Recent events have confirmed the urgent need for imposing rules which will better protect Europeans who have invested in these assets, and prevent the misuse of crypto industry for the purposes of money laundering and financing of terrorism,” said Elisabeth Svantesson, Sweden’s minister for finance.
The move comes in the wake of several high-profile scandals and arrests and substantial market turbulence in the crypto industry. The new rules cover a variety of crypto subsectors including stablecoins, utility tokens and asset-referenced tokens, notes the announcement. It also covers wallets and trading platforms housing the digital currencies. “This regulatory framework aims to protect investors, preserve financial stability, while allowing innovation and fostering the attractiveness of the crypto-asset sector,” according to the EU. “It also introduces a harmonized regulatory framework in the European Union which, given the global nature of crypto markets, is an improvement compared to the current situation with national legislation in some member states only.”
"Europe already has the most crypto-friendly banks in the world, by far. With the MiCA regulation coming into force, this global lead could increase even further. Facilitating access to banking services for crypto-asset service providers is explicitly stated as one of its goals."
Per the regulation, the new framework aims to provide fair, consistent rules for dealing with distributed ledger technologies like blockchain and other “transformative technologies in the financial sector.”
“It is expected that many applications of distributed ledger technology, including blockchain technology, that have not yet been fully studied will continue to result in new types of business activity and business models that, together with the crypto-asset sector itself, will lead to economic growth and new employment opportunities for Union citizens,” reads MiCA.
Initially, a preliminary proposal was presented by the European Commission, a 27-member executive component of the EU, in September of 2020. The proposal was part of a broader financial initiative including a separate “digital finance strategy,” a pilot program for wholesale distributed ledger technology use and the “Digital Operational Resilience Act.”
The package as adopted, explains the EU, seeks to balance innovative digital advancements with risk management, regulation and investor and consumer protection. To that end, a negotiating mandate was adopted in late 2021, and a provisional agreement was reached in June of 2022. The recent codification of these rules is the final piece of the MiCA legislative puzzle.
Additionally, the commission announced it has reached an agreement on adjacent tax rules for service providers handling crypto-asset transactions. “Crypto-assets and e-money have great potential to drive economic activity and innovation–but they also carry risks of reducing transparency and enabling tax evasion or fraud. Updating our tax rules to address these issues will help national administrations to collect tax more efficiently and keep up with evolving technology as Europe moves forward with its digital transition,” said Valdis Dombrovskis, executive vice president for an Economy that Works for People, in a statement.
Pending final approval, new tax reporting requirements related to central bank digital currencies, e-money and crypto-assets will go into effect the beginning of 2026.