Cryptocurrencies have long been considered the wild west of the financial market. However, some people are asking what is metamask. On the other hand, unregulated cryptocurrencies have brought investors high profits and massive losses. But the times without state supervision could soon be over in the EU at least in part.
So-called cryptocurrencies like Bitcoin are now a billion which has made dramatic headlines in recent months. Because the price has slumped drastically, many people have lost large sums of money. This is also due to the fact that this market, in contrast to shares and other forms of investment, has so far been unregulated.
The EU now wants to change that with the “Markets in Crypto-Assets” (MiCA) law. Contrary to what was originally discussed, the law should not lead to a ban on energy-intensive cryptocurrencies such as Bitcoin. The much-discussed NFTs are also largely excluded from MiCA.
More rules for crypto exchanges
MiCA focuses on the companies through which a large part of the business is transacted which are the so-called crypto exchanges. In the future, these will require approval in order to be allowed to do business in the EU. In addition, they must provide collateral for their users in order to be allowed to participate in the market.
Cryptocurrencies are considered a good way of being able to transfer large sums of money to other countries, largely anonymously. In addition to legitimate reasons, the EU also sees this as a tool for money laundering. Therefore, crypto exchanges are obliged to collect the data of senders and receivers and to report transactions worth more than 1,000 euros.
More collateral with stablecoins
Similar regulation also applies to providers of so-called stablecoins. These are cryptocurrencies whose value is linked to real currencies. In the future, according to the EU’s plans, providers will have to be able to prove that they have enough cash reserves to cover the value of their currency.
One stable coin where this didn’t happen was the popular TerraUSD. Their price slump was one of the triggers for the current crash in the crypto market, in which many investors lost their pension plans. This should be prevented in the future.
Which is not regulated
With a few exceptions, NFTs are currently excluded from MiCA. However, this should only apply to the first 18 months of the law. During this time, the European Commission wants to develop regulations for NFTs as an asset class.
Transactions that are not processed via crypto exchanges but are processed decentrally are also exempt from regulation. However, this is only a small part of the market.