Last week, the European Commission, European Union (EU) lawmakers, and member states (known as a trilogue in European politics) agreed on historic reforms for cryptocurrency regulation. I caught up with the Member of the European Parliament (MEP) who was in charge of drafting of the Market in Crypto-Assets (MiCA) legislation. MEP Stefan Berger not only led the drafting of the legislation in committee, but also was responsible for incorporating compromise amendments and resolutions.
“It was important that in the end Parliament, Commission and Council took together the path of innovation and technology openness, instead the path of ban,” said Berger. In March of 2022, Berger had dealt with an attempt to thwart the mandate toward a trilogue where some sought to include a divisive provision that could have effectively banned bitcoin
In Berger’s estimation, the agreed-upon regulations in MiCA will be a ‘global role model’ that could influence how other countries move forward with crypto-asset regulations. “MiCA is a European success story. Europe is the first continent to launch a crypto-asset regulation and will be a global role model,” said Berger to me in declaring the victory. Celebrating, Berger shared with me that, “particularly as rapporteur, this is a great feeling. We set clear rules for a harmonized market that will provide legal certainty for crypto-asset issuers, guarantee a level playing field for service providers and ensures high standards for consumers and investors.”
Berger celebrated the success on Twitter, including his happiness at avoiding an outright ban on proof-of-work, when he stated, “MiCA Trilogue ‘Breakthrough!’ Europe is the first continent with crypto asset regulation. “Parliament, Commission & Council have agreed on balanced #MiCA. For me as reporter is was important that there is no ban on technologies like #PoW.”
While any immediate ban on bitcoin and proof-of-work in Europe has been avoided, a press release explaining the final version of MiCA does include some provisions affecting proof-of-work. “Actors in the crypto-assets market will be required to declare information on their environmental and climate footprint […] Within two years, the European Commission will have to provide a report on the environmental impact of crypto-assets and the introduction of mandatory minimum sustainability standards for consensus mechanisms, including the proof-of-work,” said the release.
The press release also highlights new accountability standards for crypto-asset service providers (CASP) as well. “With the new rules, [CASPs] will have to respect strong requirements to protect consumers wallets and become liable in case they lose investors’ crypto-assets,” said the release.
Other key provisions in MiCA included how the European Banking Authority (EBA) will be tasked with maintaining a public register of non-compliant CASPs and how all CASPs will need an authorization in order to operate within the EU.
Regarding stablecoins, the press release notes that, “Every so-called ‘stablecoin’ holder will be offered a claim at any time and free of charge by the issuer, and the rules governing the operation of the reserve will also provide for an adequate minimum liquidity. Furthermore, all so-called “stablecoins” will be supervised by the European Banking Authority (EBA), with a presence of the issuer in the EU being a precondition for any issuance.”
“Non-fungible tokens (NFTs), i. e. digital assets representing real objects like art, music and videos, will be excluded from the scope except if they fall under existing crypto-asset categories,” stated the release. However, MiCA requires that within 18 months, “the European Commission will be tasked to prepare a comprehensive assessment and, if deemed necessary, a specific, proportionate and horizontal legislative proposal to create a regime for NFTs and address the emerging risks of such new market.”
According to Berger, cryptocurrencies had been both out of scope in European legislation with divergent laws existing between the EU Members. “So far, crypto-assets, such as cryptocurrencies, have been out of the scope of the European legislation and too many often divergent laws exists in Member States,” said Berger.
Ultimately, Berger was consistent and influential in his role as a lead negotiator on the MiCA package in his desire to avoid a proof-of-work when challenged in March of 2022. His tweet on March 25 illustrates his excitement at the good news of maintaining his mandate going into the negotiations with the Trilogue, at a time when even Berger had expressed sentiments about not being sure how this would turn out because of ‘politics.’ Berger stated in the tweet, “Good news! My mandate is NOT challenged. I will now go into the trilogue negotiations with the position that there will be no #PoW ban. The EU Parliament gives me tailwind & shows innovative strength.”
For the United States, the issues related to the conflicts in state-by-state money transmission laws may face similar overhauls as both the White House and Congress will be highly focused on potentially sweeping federal legislation that could have exclusive jurisdiction over state laws. Additionally, the United Kingdom may feel similar pressure to react to how Europe has been a first-mover with crypto-asset regulation. The hypothesis of whether harmonizing consistent regulations across a continent can stabilize the currently tumultuous crypto-asset marketplace can now be tested and both the U.S. and U.K. will certainly be watching to see how the industry and marketplace reacts to the new MiCA laws in Europe.