The European Union is about to enact two major cryptocurrency laws, requiring NFT platforms to apply for a license and prohibiting stablecoins from paying interest.

The previous EU crypto regulations "Regulation on Markets in Crypto Assets" and "Draft Regulation on Crypto Regulation" have reached the final third stage, further regulating non-custodial wallets, NFTs, and stablecoins. Industry insiders believe the significance of these regulations is similar to the EU GDPR, which had a significant global impact due to its lack of geographical restrictions.

Regarding the two regulations MiCA (Markets in Crypto Assets) and TFR (The Transfer of Funds Regulation), you can refer to previous reports for more information.

The two drafts are being discussed among the European Parliament, Council, and Commission, and the third and final decisive meeting will take place on 6/30. Patrick Hansen, former Unstoppable Finance director and current advisor at Presight Capital, who continues to track this issue, has compiled a list of topics still under discussion.

Advertisement - Please scroll down for more content

NFT within Regulatory Scope?

NFT may be included in the MiCA framework, with regulatory concessions resulting in:

• Most NFT issuers exempted.
• Application services in the NFT trading market requiring Crypto Asset Service Providers (CASP) license, with exemptions possible for low trading volumes.

No Interest for Stablecoins

Key points include:

1. Algorithmic stablecoins also to be regulated.
2. Issuers of electronic money tokens (EMT) and asset-referenced tokens (ART) will face high regulatory requirements.
3. CASP prohibited from offering interest on stablecoins.

Aside from the third point drawing attention, if stablecoins make significant progress in payments, the MiCA regulation also provides the option for EU authorities to ban the issuance of stablecoins.

DeFi

After lengthy negotiations, Patrick Hansen noted that "mainstream DeFi" will be excluded from the MiCA regulatory scope.

The Committee will release an independent report in 2023, initiating a pilot project called "Embedded DeFi Regulation."

Cryptocurrency Environmental Issues

As reported earlier, the Bitcoin ban is no longer under discussion, but every cryptocurrency listed must have comprehensive disclosure requirements.

Transfer of Funds Regulation (TFR)

Which transactions and transfers need to be reported?

• The previous €1,000 threshold has been removed, indicating all transfers fall under the Transfer of Funds Regulation.
• P2P transactions wallet-to-wallet are not within the scope of TFR.

Several pending issues include:

1. CASP only required to report to AML authorities transfers over €1,000 received to "non-custodial wallets." The Council currently disagrees, but a compromise may be reached in the end.

2. Parliament supports CASP in identifying "non-custodial wallets" as the counterparty in transactions, while the Council and Committee oppose it, recommending CASP to address money laundering risks through on-chain analysis and take measures based on the analysis results.

Patrick Hansen pointed out that the EU will also consider the approaches of other major jurisdictions, such as the UK, on related issues. The UK Treasury previously stated that tracking and collecting information on all transfers sent to private wallets is unreasonable. Therefore, he believes that Parliament will compromise on the issue of fund transfers.

Why are these two bills important?

Patrick Hansen emphasized that the EU is the first major jurisdiction to implement a comprehensive regulatory framework for cryptocurrencies.

He compared this to the GDPR (General Data Protection Regulation), which, although primarily enforced in the EU, has no territoriality due to the borderless nature of the internet.

He believes these two bills will to some extent become global standards and also affect the regulatory framework in the US and other countries.