Besides MiCA, what other encryption laws in Europe deserve attention?

Compilation | Wu said blockchain

Original | DL News

Recommended reading: "Interpretation of the EU MiCA Act: Tighter regulation, what impact will it have on the encryption ecosystem?" "

● The European Council has approved the long-awaited MiCA (Markets in Crypto-Assets) regulation, which is the final step for it to become a formal law.

● Other laws that may pass in the EU include cryptocurrency tax reporting standards, anti-money laundering rules, seeking to issue a digital euro and smart contract regulations, among others.

The European Union's key cryptocurrency rulebook has just passed its final legislative hurdle. Representatives of the member states of the European Council voted unanimously to approve the crypto asset market regulation. The rules, known as MiCA, are expected to go into effect in June, with new laws covering consumer protection, market integrity and financial stability. Swedish Finance Minister Elisabeth Svantesson, speaking on behalf of the current Council of Sweden president, said the rules would "better protect Europeans who invest in these assets and prevent the crypto industry from being used for money laundering and terrorism financing."

Companies offering encryption services in the EU will have legal certainty that MiCA will allow them to "transfer" their licenses from one member state to other countries in the 27-country bloc. Stablecoin issuers will need to meet capital and reserve requirements and will face restrictions on non-euro-denominated stablecoins. Regulations on stablecoins will come into force by mid-2024, with the rest by early 2025. Until then, European regulators need to draft technical rules on how the legislation will be implemented.

EU policymakers set out to end the cryptocurrency "Wild West" and lay out a regulatory blueprint for other jurisdictions. While MiCA has been hailed as the first major, comprehensive regulation of crypto assets, it is far from the only regulation affecting the industry. Here are nine more rules that will shape the European crypto industry.

The Travel Rule for Cryptocurrencies

**The revised Funds Transfer Regulation (TFR) requires that crypto transactions of both the sender and receiver of funds be accompanied by identity details. **This regulation is expected to be implemented concurrently with MiCA. The European Council approved the TFR on Tuesday.

“Today’s decision is bad news for those who misuse cryptoassets to conduct illicit activities, circumvent EU sanctions, or finance terrorism and war,” said Svantesson. ) are consistent with recommendations for crypto assets and anti-money laundering.

It's worth noting that transfers to self-hosted wallets that aren't part of a third-party provider will need to include identifying information for transfers worth more than €1,000 (~$1,090). Purely peer-to-peer transactions from self-hosted wallets will not be subject to this regulation.

Anti-Money Laundering Rules

**The European Union's Anti-Money Laundering Regulations (AML) have listed Decentralized Finance (DeFi), NFT platforms and DAOs as obligated entities. **MiCA excluded these from its scope - sparking discussion among EU officials about MiCA II - so the AML Act fills these gaps.

For the crypto industry, a major point of discussion has been the restrictions placed on commercial payments involving self-hosted wallets worth more than 1,000 euros (about $1,090). Blockchain advocates recommend that policymakers align with the measures outlined in the TFR.

**Other provisions of the bill include a ban on privacy coins like Monero or Dash, and a ban on anonymous accounts. **Negotiations are expected to conclude in the summer.

Smart Contract Supervision

The Data Bill, currently being negotiated among European institutions, includes a regulation on smart contracts for data sharing. ** Provisions include including an emergency stop switch in the smart contract. **

Although this regulation is designed to cover smart devices and the Internet of Things, some in the industry worry that the scope of regulation is not clearly defined and cannot exclude blockchain-based DeFi smart contracts.

Marina Markezic, executive director of the European Encryption Initiative, previously told DL News that the Data Act could render public blockchains unusable with such a requirement. The trade association has proposed changes to policymakers as they enter the final stages of negotiations, expected until June.

Cybersecurity Act

The Digital Operations Resilience Act (DORA) sets standards for network and data security for companies in the financial sector such as credit institutions, investment firms, and encryption service providers. The new law, which will apply from January 2025, requires companies to establish a strong ICT risk management framework, report relevant incidents to authorities and regularly test their digital operations.

“DORA is actually the cornerstone of our work on digital finance in the EU,” European Finance Commissioner Mairead McGuinness told members of parliament in November. "Financial institutions are increasingly dependent on technology. More and more people and businesses are managing their finances online. Therefore, it is critical to protect the financial system from cyber-attacks and online fraud."

Tax Report

The eighth edition of the Directive on Administrative Cooperation (DAC8) imposes tax reporting requirements for crypto asset service providers. A crypto reporting framework could add up to 2.4 billion euros to EU tax revenue annually, according to a briefing from the European Parliament.

**From 2026, companies providing crypto services will be required to report their customers' domestic and cross-border transactions to national authorities. **This may include non-fungible tokens (NFTs) and central bank digital currencies.

For the first time in EU legislation, mortgages and loans have been included in the definition of crypto activities, which has drawn industry opposition. Since this is a directive rather than a regulation, EU member states will have more flexibility in how to implement the rules.

For all tax-related policies, decisions are made by the European Council, which directly represents member states. The Council published a version of the text on Monday and can await selective consultations in the European Parliament before adopting it.

Tokenized Marketplace Sandbox

The DLT (Distributed Ledger Technology) pilot regime is a regulatory sandbox that allows traditional financial players and market newcomers to experiment with tokenized financial instruments and innovative markets based on decentralized technologies. The project started in March 2023 and will last for three years.

ESMA will have a supervisory role in the pilot and will report on its findings in March 2026. Once submitted, the European Commission is expected to introduce legislative proposals.

The DLT pilot regime is part of the digital finance package proposed by the European Commission in 2020, alongside MiCA and DORA.

Digital Euro

The European Central Bank is in the final push to design a central bank digital currency. While a decision on whether to proceed is expected in October, the European Commission will present legislative proposals in June.

**A digital euro will likely rely on intermediary platforms like private banks to provide users with wallets, without central banks themselves being able to do data collection. **

"Using a digital euro could help increase the role of the euro internationally," the economic commissioner told a meeting of Eurogroup finance ministers on Monday, adding that a CBDC could help strengthen monetary sovereignty.

Metaverse and Virtual World Proposal

The European Commission published a proposal on virtual worlds in April and is accepting feedback until early May. Industry and experts responded to the consultation and the EU institutions will take this feedback into account in the next text publication.

According to a press release, the EU proposal aims to regulate the nascent Metaverse "based on respect for digital rights and EU law and values."

European officials are wary of possible antitrust concerns, such as tech giant Meta's vision of creating a single metaverse.

Digital Identity Framework

** The European Union proposes a digital ID to give citizens a personal wallet with access to public services. **The legislation includes zero-knowledge proof technology—revealing only necessary data in a given transaction—as a way to protect user privacy.

The industry has objected to the possibility of parliament removing electronic ledgers as the technical basis for the framework, an issue that is still being negotiated between agencies.

“Removing this concept from regulations will raise many follow-up questions, as electronic ledgers are now widely used as a key component of trust architectures,” reads an open letter from the International Association for Trusted Blockchain Applications. The ledger is crucial in building a robust European digital infrastructure against cyber-attacks, which benefits both European businesses and consumers."