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Thursday, July 25, 2024

EU Commission opposes parliamentary draft

The trilogue negotiations on the MiCA regulation in the EU are currently underway. In it, the Commission expresses “serious doubts” about certain Parliament proposals.

It has been almost two months since the EU Parliament, as the last European authority, voted on its draft “Markets in Crypto Assets” (MiCA ) . Since then, the paper has been discussed in trilogues with the Council and the Commission. However, the latter does not agree with some of Parliament’s points and is pushing for improvements. This emerges from an unofficial letter from the Commission that is available to BTC-ECHO.

Specifically, the executive body of the EU expresses concerns about measures to combat money laundering and the financing of terrorism. In its draft under Article 4, Parliament had called for a ban on licensing crypto providers in the EU who are based in non-compliant jurisdictions or “high-risk areas” or are based in countries that do not levy corporate tax or tax corporate profits.

The Commission disagrees. There is no comparable prohibition in other legislation. In addition, the measure violates international trade rules of the World Trade Organization (WTO). It is therefore not clear why the regulation should apply specifically to crypto service providers (so-called CASP). In addition, the providers are subject to the EU directives on combating money laundering and terrorist financing anyway, which offer “strong protection” against third countries from “high-risk areas”. According to the EU Commission, a ban would only mean an additional burden for EU authorities.

Agreement on TFR in the EU

Meanwhile, there is agreement on the so-called “Transfer of Funds Regulation” (TFR) , a partial regulation of MiCA, which, among other things, is intended to introduce a reporting obligation for all crypto transactions. CASPs are obliged to collect transaction data once MiCA comes into force. Robert Kopitsch from the Blockchain for Europe association still sees open questions.

What happens to all the collected data and what is it used for? As of today, it is not clear what will happen to it and who should actually process this excess of information.

In addition, the project is not only a “heavy burden” for small and medium-sized companies, but also creates a great risk for consumers due to the strong concentration of data at a central authority.

But it is not only in the crypto sector that the thumbscrews are being tightened with regard to KYC and AML measures in the EU. Even in the traditional financial sector, digital transactions of EUR 1,000 or more must be reported when the new Travel Rule of the Financial Action Task Force (FATF) came into force.

“Serious doubts about proportionality”

To ensure that crypto providers also comply with the reporting obligations, the EU Parliament is proposing a register in which non-compliant CASPs are to be listed. The European securities regulator ESMA is to manage and maintain the list. However, the Commission has “serious doubts” about the feasibility and proportionality of the proposal. The executive body already expressed these concerns in the first round of trilogues at the end of April. Such a project should, if at all, be included in a general money laundering regulation that affects all financial market participants.

In addition, the EU Commission criticized Parliament’s criteria for when CASPs are considered “non-compliant” as “unclear”. It is not clear whether other compliance rules, for example from the banking sector, will also be included in the regulation. In general, the Commission is demanding improvements from Parliament on this point.

In addition, the Executive Body intends to table a compromise proposal shortly. However, there is not much time left. The next round of trilogues is scheduled for May 18th.

Dave Triplett
Dave Triplett
Dave is a passionate sports journalist with a knack for capturing the excitement and drama of athletic competition. He has a keen eye for player dynamics, team strategies, and the evolving landscape of sports culture. His articles blend statistical insights with compelling narratives, providing readers with comprehensive coverage and behind-the-scenes perspectives on their favorite athletes and teams.

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