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EU’s MiCA aims to bring greater clarity to the crypto-asset market

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EU’s MiCA aims to bring greater clarity to the crypto-asset market

Global regulators are taking a step-by-step approach to establishing rules and standards for the cryptocurrency space. It seems that this order of transparency and clarity is the common direction of the authorities, including the European Union (EU).

During Korean Blockchain Week 2022, Peter Kerstens, Advisor to the European Commission, presented the Crypto Asset Markets (MiCA) and what it could mean for non-fungible tokens (NFTs).

Fully Collateralized Stablecoin

Kerstens said during Tuesday’s roundtable that the MiCA bill would prevent meltdowns like Terra’s. Under MiCA’s oversight, stablecoin projects will need to provide greater transparency and a greater ability to buy back assets, as requested.

The Terra-LUNA left the market with severe damage as the entities involved came in quick succession. The EU official explained that MiCA aims to protect European investors against Terra projects by preventing, “such systems to come to market.

Issuers of stablecoins like Tether and other unsecured crypto-assets are required to follow historic law in order to do business in Europe.

The framework consists of the issuance of a white paper, the registration of authorities and, for stablecoins, fully guaranteed reserves to meet redemption requests in the event of large withdrawals.

The provisional agreement on MiCA, which is the result of a nearly two-year discussion, was reached in June by the two legislative bodies of the European Union (EU) – the Council of the European Union announced that the Presidency of the Council and the European Parliament.

The crypto-asset market has long been fragmented and volatile while law enforcement is still uncertain. Although global authorities need a long period of research to find an appropriate legal framework, the current situation represents an urgent call for regulation.

Terra’s collapse prompted South Korean officials to come up with a comprehensive set of crypto laws. The Digital Asset Basic Act, according to South Korean regulators, will adopt ideas from the United States and Europe, particularly MiCA, “to improve global consistency” in crypto regulation.

NFT under MiCA

Non-fungible tokens (NFT) will be regulated like cryptocurrencies, as noted by Peter Kerstens. Under MiCa’s watch, an NFT is not simply “a token is issued as a collection or series”, despite how unique that series or collection looks.

The EU MiCA requires absolute clarity in the collection of NFTs, which means that details of the underlying protocol applied to NFTs are included in the white paper. Misleading information and false promises of future value are prohibited.

However, adding NFTs to the scope of MiCa is controversial. EU national governments believed it would be an unwarranted extension of a bill intended to protect Europeans in stablecoins and initial coin offerings.

Policymakers in the European Parliament, on the other hand, have said that price manipulation like the washout trade makes the NFT market vulnerable.

A white paper for every NFT is a “dumb” idea, according to Kerstens’ earlier statement. And this idea would raise concerns about its side effect on NFT platforms like OpenSea & Looks rare – it’s a dealbreaker for innovation in the industry.

The initial version of MiCA was drafted in 2020 by the European Commission, which is the main governing body of the EU.

Since then, he has been helpful in discussions between the Council of the EU and its Parliament on how to change the law. The MiCA Bill, which has yet to become law, is expected to come into effect in 2023-2024.

A global movement

The South Korean government has yet to decide how it will handle the market for cryptocurrency and blockchain assets. It is possible that how the European Union and the United States react to the situation will have a significant impact on how things develop from now on.

Crypto and blockchain technology has posed a series of challenges for policy-making, including financial supervision regulations, consumer protection and tax administration, while encouraging and facilitating innovation .

The goal is to take the most effective steps in the operational management of crypto to comply with anti-money laundering program commitments, consumer protection laws, and financial oversight.

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