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Cryptocurrencies in the EU: New Rules to Increase Benefits and Limit Threats | Actuality

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On Monday evening, the Economic and Monetary Affairs Committee adopted, by 31 votes to 4 and 23 abstentions, its negotiating position on new rules on crypto-assets. They aim to strengthen user confidence and support the development of digital services and alternative means of payment.

Key provisions agreed by MEPs for those who issue and trade crypto-assets (including asset-referenced tokens and e-money tokens) cover transparency, disclosure, authorization and supervision of transactions. Consumers would be better informed of the risks, costs and charges. Additionally, the legal framework supports market integrity and financial stability by regulating public offerings of crypto-assets. Finally, the agreed text includes measures against market manipulation and to prevent money laundering, terrorist financing and other criminal activities.

Environmental threats

To reduce the heavy carbon footprint of cryptocurrencies, including mechanisms used to validate transactions, MEPs call on the Commission to present MEPs with a legislative proposal to be included in the EU taxonomy (a classification system) for sustainable activities all crypto-asset mining activities that contribute substantially to climate change, by January 1, 2025.

MEPs point out that other industries (eg video games and entertainment industry, data centres) also consume energy resources that are not climate friendly. They ask the Commission to work on legislation dealing with these issues in different sectors.

Monitoring

MEPs want European Securities and Markets Authority (ESMA) to oversee the issuance of asset-referenced tokens, while European Banking Authority (ABE) will be responsible for supervising electronic money tokens.

Next steps

The decision to enter into negotiations with EU governments on the final form of the bill passed by 33 votes to 25.

context

Crypto-assets, including cryptocurrencies, are not issued or guaranteed by any central bank or public authority. They are currently outside the scope of EU law. This creates risks for consumer protection and financial stability, and could lead to market manipulation and financial crime. The bill distinguishes between crypto assets in general, asset-referenced tokens (ART), also known as “stablecoins,” and e-money tokens primarily used for payments.

The mechanisms used to validate transactions in crypto-assets have a significant environmental impact, especially for proof-of-work mechanisms, requiring a lot of energy and resulting in a high carbon footprint and generating electronic waste. By most estimates, Bitcoin’s energy consumption is equivalent to that of entire small countries.