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Source: The post is based on the article “The EU’s new crypto-legislation” published in The Hindu on 24th April 2023
What is the News?
The European Parliament has approved the Markets in Crypto Assets (MiCA) regulations. These are the world’s first set of comprehensive rules to bring largely unregulated cryptocurrency markets under the ambit of regulation by government authorities.
What is the purpose of MiCA regulations?
MiCA aims to protect investors and ensure financial stability while allowing innovation and fostering the attractiveness of the crypto-asset sector.
The regulations will not only apply to traditional cryptocurrencies like Bitcoin and Ethereum but also to newer ones like stablecoins.
However, it will not regulate digital assets that would qualify as transferable securities and function like shares or their equivalent and other crypto assets that already qualify as financial instruments under existing regulation. It will also exclude non fungible tokens (NFTs).
What are the key provisions of MiCA regulations?
The regulations will impose a number of requirements on crypto platforms, token issuers and traders around transparency, disclosure, authorization, and supervision of transactions,
The rules require every crypto asset service provider (CASPs) to get incorporated as a legal entity in the EU. They can get authorized in any one member country and will be allowed to conduct their services across the 27 countries.
They will then be supervised by regulators like the European Banking Authority and European Securities and Markets Authority, who will ensure that the companies have the required risk management and corporate governance practices in place.
The rules also address environmental concerns surrounding crypto, with firms forced to disclose their energy consumption as well as the impact of digital assets on the environment.
What has been the reaction to MiCA regulations?
Leaders at some of the biggest cryptocurrency firms have taken exception to some aspects of MiCA, but the broad view is that it is better to have a regulatory framework than having no rules at all and attracting regulatory action on a case-by-case basis without clarity.
How is crypto regulated in India?
India is yet to have a comprehensive regulatory framework for crypto assets. A draft legislation on the same is reportedly in the works.
A full-fledged regulation aside, the Indian government has taken certain steps to bring cryptocurrencies under the ambit of specific authorities and taxation.
In the Union Budget for 2022, the Finance Ministry said that cryptocurrency trading in India has seen a phenomenal increase and imposed a 30% tax on income from the transfer of any virtual digital asset.
In March 2023, the government placed all transactions involving virtual digital assets under the purview of the Prevention of Money Laundering Act (PMLA).
