EU moves to rein in the wild west of crypto assets
The EU has taken a step toward taming the “wild west” of crypto assets by approving a breakthrough set of regulations for the sector.
On Thursday, representatives from the European Parliament and EU member states hammered out an accord that includes safeguards against market misuse and manipulation, as well as forcing crypto businesses to give information about the environmental impact of their assets.
In light of the recent drop in cryptocurrency prices, the entire market worth has decreased from $3 trillion (£2.5 trillion) last year to less than $900 billion.
The law governing markets in crypto assets (MiCA) is projected to effect towards the end of 2023. Globally, crypto assets are generally unregulated, with national operators in the EU obliged to demonstrate anti-money laundering safeguards. The MiCA law is also expected to serve as a model for other crypto regulatory regimes worldwide.
Cryptocurrency refers to a class of digital assets that share the same fundamental structure as bitcoin: a publicly accessible “blockchain” that records ownership without the intervention of a central authority.
Supporters of the industry argue that it is a beneficial investment because, for example, it has low costs and, unlike traditional currencies, is not beholden to governments. However, its skeptics argue that the lack of governmental control or implied government endorsement, due to crypto and bitcoin’s independent roots, makes it vulnerable to scams and dramatic price volatility.
MiCA will be the world’s first comprehensive regulation for crypto assets, with strong safeguards against market misuse and manipulation, according to Ernest Urtasun, a Green party MEP.
Following the collapse of the TerraUSD and Luna tokens last month, the large US cryptocurrency lending company Celsius Network froze withdrawals and transfers. However, the sector has shown to be vulnerable to broader economic forces. These include stock market falls caused by rising inflation and subsequent interest rate rises by central banks. As the US, UK, and Swiss central banks did last month, raising interest rates can make risky investments less appealing.
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