The European Union has created different regulations for cryptocurrencies, which aim to protect consumers and ensure market integrity. Key factors in these regulations include transparency, cross-border consistency, authorization, and supervision of cryptocurrency operations. Below, we will learn about the main cryptocurrency regulations developed by the European Union.
MiCA Regulation (Markets in Crypto-Assets)
The Markets in Crypto-Assets Regulation (MiCA) is a comprehensive regulatory framework that allows for the regulation of crypto assets and their service providers. It is important to note that this is the most important, and extensive regulation adopted by the European Union for cryptocurrencies. Among the highlights of this regulation are the following:
Establish a clear framework for the issuance, trading, and use of cryptoassets.
Require crypto-asset service providers to be licensed and subject to oversight by competent national authorities, ensuring certain standards of security, legality, and quality in the sector.
Identify and regulate various types of cryptoassets, as each has different characteristics and requirements. In this way, the aim is to maintain a stable value by backing each electronic money token in relation to a single official currency.
Include measures to protect consumers in the cryptoasset market.
Apply uniform rules for all service providers and issuers of cryptoassets that were previously not regulated by existing EU financial services legislation.
AMLD Directive (Anti-Money Laundering Directive)
The European Union enforces anti-money laundering measures through its Anti-Money Laundering Directive (AMLD). Cryptocurrency exchanges and digital wallet providers are required to comply with Know Your Customer (KYC) requirements and report suspicious activity.
It is important to note that with the sixth update of this directive (AMLD6), the rules to combat financial crimes in the cryptoasset sector were strengthened, as this update expands the list of underlying crimes (or predicate crimes) that can be considered as money laundering, including tax crimes, environmental crimes, cybercrime and trafficking in cultural property.
Digital Operational Resilience Act (DORA)
The Digital Operational Resilience Act (DORA) is a regulation created by the European Union that seeks to strengthen the security of information and communications technologies (ICT) used by financial institutions.
Among DORA’s main objectives are the following:
Harmonize regulations, creating a unified framework for information and communications technology (ICT) risk management across the European Union.
Strengthen the stability of the financial system by ensuring that financial institutions can prevent, withstand, and recover from any type of disruption or problem related to the use of information and communications technologies (ICT).
Improve third-party risk management, especially those involving the management or storage of information in the cloud and data centers.
Improve security and oversight of critical third-party vendors.
General Data Protection Regulation (GDPR)
Although this regulation is not specifically designed for crypto assets, the GDPR regulates how personal data is handled on cryptocurrency-related platforms. This regulation aims to ensure that companies ensure that their users’ data is protected and processed in accordance with privacy laws.
Supervision and Coordination by ESMA and EBA
Importantly, the European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) oversee the implementation of these regulations, issuing guidelines on how to interpret and apply the rules in the context of cryptoassets.
What do you think about this topic? Do you want to know more about the European Union’s regulations for cryptocurrencies?
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