The European Council has approved the highly anticipated MiCA (Markets in Crypto-Assets) regulation, marking its final step toward becoming law. While MiCA establishes crucial frameworks for consumer protection and market integrity, it's far from the only regulation shaping Europe's crypto landscape. Here are nine additional policies poised to impact the industry:
1. Crypto Travel Rule
The revised Funds Transfer Regulation (TFR) mandates identity verification for both sender and recipient in crypto transactions. This aligns with Financial Action Task Force (FATF) recommendations and takes effect alongside MiCA.
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Key aspects:
- Applies to transfers exceeding €1,000 (~$1,090)
- Excludes pure peer-to-peer transactions from self-hosted wallets
- Targets money laundering and sanctions evasion
2. Anti-Money Laundering (AML) Framework
The EU's AML legislation extends oversight to:
- DeFi platforms
- NFT marketplaces
- Decentralized Autonomous Organizations (DAOs)
Notable provisions:
- €1,000 threshold for commercial payments involving self-hosted wallets
- Privacy coin bans (e.g., Monero, Dash)
- Anonymous account restrictions
3. Smart Contract Regulations
The Data Act introduces requirements for smart contracts used in data sharing, including:
- Emergency stop mechanisms
- Risk assessment protocols
Industry concerns: Potential overreach into DeFi applications remains unresolved as negotiations conclude in June 2023.
4. Digital Operational Resilience Act (DORA)
Effective January 2025, DORA enforces cybersecurity standards for:
- Financial institutions
- Crypto service providers
Requirements include:
- ICT risk management frameworks
- Incident reporting protocols
- Regular system stress-testing
5. Crypto Tax Reporting (DAC8)
The 8th Directive on Administrative Cooperation introduces:
- Annual reporting obligations for crypto service providers
- Coverage of NFTs and CBDCs
- Estimated €2.4 billion/year in additional EU tax revenue
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6. Tokenized Markets Sandbox
The DLT Pilot Regime (launched March 2023) allows:
- Testing of tokenized financial instruments
- Innovation in decentralized market infrastructure
- Three-year experimentation window ending 2026
7. Digital Euro Initiative
The European Central Bank's CBDC project features:
- Intermediated wallet provision (via private banks)
- Limited central bank data collection
- Expected design phase completion by October 2023
8. Metaverse Governance Proposals
April 2023 saw EU policy frameworks addressing:
- Digital rights preservation
- Anti-competition safeguards
- User protection in virtual worlds
9. European Digital Identity Framework
Proposed legislation includes:
- Sovereign identity wallets
- Zero-knowledge proof integration
- Blockchain-based trust architectures
FAQ
When does MiCA take full effect?
Stablecoin regulations apply mid-2024, with remaining provisions effective early 2025.
How does TFR differ from traditional banking rules?
While modeled after FATF standards, TFR introduces crypto-specific thresholds and self-hosted wallet provisions.
Why is DORA significant?
It establishes uniform cybersecurity requirements across EU financial sectors, including crypto services.
What's controversial about the Data Act?
Potential overregulation of public blockchain smart contracts remains unresolved.
How will DAC8 affect crypto businesses?
From 2026, providers must report client transactions to tax authorities, including cross-border transfers.
Are privacy coins banned EU-wide?
The AML package proposes bans, but final text awaits summer 2023 negotiations.
Note: All regulatory timelines subject to official EU implementation procedures.
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