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Europe: the laws that worry the crypto ecosystem
In recent weeks, several amendments to toughen legislation on cryptos have been tabled - one of them adopted - in the European Parliament. The industry is sounding the alarm.
What's going on at the European Parliament? Over the past few weeks, there has been something of a fever around cryptocurrencies. During the examination of two texts, some MEPs have tabled a series of amendments to, in their view, "better" regulate the crypto sector.... One of the texts, which would require crypto service providers to check the identity and flows of all users, was adopted, prompting strong criticism from Web3 players. While nothing is definitive, these texts do raise a lot of questions. The Big Whale has taken a closer look!
First of all, what texts are we talking about?
En l'occurrence de deux textes bien différents.
- The first, is the European regulation "Markets in Crypto-Assets" (MiCA). The aim of this text is to harmonise legislation on cryptos across the European Union. One of the main proposals in the regulation is to create a European Digital Asset Service Provider (EDASP) status on the model of what France did in 2019 with the Pacte law. Around 30 companies are registered with the Autorité des marchés financiers (AMF) as PSANs.
- The second, is the new EU anti-money laundering directive. Presented on 21 July 2021, the directive (which, unlike a regulation, must be transposed into national law) includes several provisions and in particular better control of transfers of funds (cash) within the EU. Initially, the directive did not cover cryptocurrencies, but some MEPs wanted to add them.
It was as part of the examination of these two texts carried by the European Commission that MEPs tabled the much-criticised "crypto" amendments.
What are these amendments?
- The amendment concerning MiCA was tabled by the Green Group in the Mid-March. It provided for a ban in the EU on all crypto-assets based on the "Proof of Work" consensus algorithm. If we follow the amendment, Bitcoin, Ethereum (which is however in the process of migrating to "proof of stake") and all other cryptos using this energy-intensive mechanism, should have been banned from Europe... The amendment was finally rejected in extremis (32 votes against and 24 votes) by the European Parliament's Committee on Economic and Monetary Affairs (ECON).
- The amendment on the anti-money laundering directive was tabled at the end of March. As with cash, it provides for payment service providers to be required to provide information on the issuer and beneficiary of cryptocurrency transfers. The rule applies not only to platform customers, but also to wallets held directly by individuals, i.e. "unhosted wallets" In practice, this means that the various crypto service providers, such as France's Coinhouse, will have to check the compliance of all their customers' incoming and outgoing flows. Unlike the amendment on Proof of Work, the amendment on "Unhosted wallets" was, in fact, adopted (58 for, 52 against, and 7 abstentions) in committee.
Est-il pour autant si grave?
Certainly, the text as it stands requires service providers to list all transactions. A "folly", according to the companies interviewed by The Big Whale. But the text is still a long way from being definitively adopted.
The procedure for passing a law takes time. In this case, it was Parliament that adopted the amendment. It must now be studied by the European Council, made up of the heads of state and government, and by the Commission in dialogue with the Parliament. This is the stage of the "trialogue" where the three powers will discuss and try to find a common solution.
It is only following the changes made by the Council and the Commission that the text will be definitively adopted or not. According to several sources, the vote is unlikely to take place before the summer. There will be a lot of debate," says one lawyer. The Big Whale will be following the matter closely.
Several amendments have provoked strong reactions from the industry.
Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial and accounting advisors.
