Is the EU About to Start Regulating Cryptocurrencies?

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  • Through the MiCA regulation, the EU is proposing a special regulatory framework for crypto asset providers, limiting offers and exchanges to licensed providers.
  • According to the proposed EU Markets in Crypto-Assets Act, the industry is divided into three different forms of cryptocurrency: NFTs, stablecoins, and digital currencies.
  • The MiCA proposal raises some problems in areas of supervision, global consistency, and non-EU cryptocurrency requirements.

The EU aims to incorporate more legal guidelines for the crypto market under MiCA, making it the first international organization to do so.

It seems that as cryptocurrencies increase in popularity, so do the crises that surround them, resulting in an obvious need for a stronger regulation oversight of digital assets. Europe has proposed the EU Markets in Crypto-Assets Act, aiming to introduce a framework for regulating and supervising digital assets and financial institutions. If successful, the "crypto regulation" act will be the first of any international institution to regulate the cryptocurrency and digital assets sphere of finance. Within the proposal are plans to allow only licensed providers with an EU-registered office to offer and exchange crypto.

Explanation of asset forms

The regulation act divides the digital finance industry into three different forms of assets: NFTs, stablecoins, and digital currencies. NFTs, or non-fungible tokens, are known as somewhat of a virtual gadget, providing digital access to a good or service. Stablecoins can be interpreted as a bit more "stable" for some, as they are attached to some sort of real world asset. Digital currencies represent a fixed exchange rate to a hard currency.

There are specific stipulations for each form of asset.


Providers of NFTs or any other form of utility token are required to draw up a "crypto asset white paper" to notify the authorities before issuing the asset. According to a policy brief by the European Capital Markets Institute, "The white paper will contain disclosure, conduct and liability rules that are in principle prospectus requirements to address the inadequate disclosures, misrepresentations and fraud currently often observed in certain initial coin offerings. White paper issuers will benefit from a European passport for tokens. There is no formal ex-ante approval requirement."


Anyone issuing stablecoins are required to be formally authorized, with a minimum capital and an ongoing capital requirement. There are also stipulations surrounding reserves and a stabilization mechanism of tokens.

Digital currencies

Digital currencies can only be offered to the public by an authorized credit institution or an authorized electronic money institution. "E-money tokens shall be issued at par value and on the receipt of funds, and upon request by the holder of e-money tokens, the issuers must redeem them at any moment and at par value."

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Some problems with the proposal

The MiCA proposal is raising some eyebrows in terms of whether it can truly accomplish what it has set out to do. Supervision for crypto assets and exchanges still appears to be on the lighter side, falling far behind other financial instruments and exchanges. The act also states that only crypto coins authorized within the bloc can be offered to investors. Although the EU is the first international organization to propose such a framework, other member states already have legislation for crypto, creating a lack of harmony at a multinational level and resulting in confusion for investors. Non-EU cryptocurrencies are also suffering from a lack of internationally consistent regulations, and they will have to register under one of the three forms to gain admission to the market.

The bottom line

The EU continues to wait on the approval of its proposed regulation act that aims to focus on three forms of digital financial assets. Even with the integration of the new framework, some are still concerned about limited supervision and an international inconsistency leading to continued confusion and lack of clarity in the crypto market and exchange world.

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