Council of the European Union moves forward on two crypto proposals
The Council of the European Union adopted two proposals for digital assets on Wednesday, aiming to create regulatory frameworks for crypto assets focused on consumer protection and mitigating cyber threats.
Both the Regulation on Markets in Crypto Assets (MiCA) and the Digital Operational Resilience Act (DORA) are part of the Council's digital finance package. That package also contains the Council's overall strategy related to crypto asset regulation and a proposal on distributed ledger technology. The intention is to create unified rules of the road for crypto in the EU to foster innovation with investor protection throughout member states, rather than allowing a fragmented approach to form in which standards differ from nation to nation.
"A dedicated and harmonised framework is therefore necessary at Union level to provide specific rules for crypto-assets and related activities and services and to clarify the applicable legal framework," read a proposal in the package. "Such harmonised framework should also cover services related to cryptoassets where these services are not yet covered by Union legislation on financial services."
The MiCA creates a framework for the issuance and services related to transferrable crypto assets, mainly calling on firms to be transparent in their operations through white papers submitted with any prospectuses and mandating that marketing be "fair" and "clearly identifiable" as ads. Any central bank digital currencies or tokens issued by other public authorities are exempt from the framework, as are tokens that function like loyalty points, non-fungible tokens (NFTs) or tokens representing physical assets or services. The proposal is also clear that the regulations will apply to natural or legal persons, not the tech itself.
The DORA creates information and communication technology risk management mandates. In addition to mandating testing of these systems to stave off cyber risks, it creates a uniform reporting framework for any incidents. It also empowers European regulators to take a closer look at a firm's use of third-party service providers used for information or communication technology.
The Council will enter into negotiations with the Parliament on the proposals, and once they reach a provisional agreement, both institutions will formally adopt the regulations.
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