The European Union (EU) is slowly tightening its laws for the crypto industry. Its already approved legal framework Markets in Crypto Assets (MiCA) is expected to arrive between 2023 and 2024. But it may not be alone. A new directive for crypto providers was just proposed by the European Commission.
The proposal is focused on fair taxation across the member states, especially aiming for a recovery plan after the COVID-19 pandemic and the war in Ukraine. For the Commission, digital assets may “pose substantial risks for tax evasion”. Therefore, they’re preparing new measures to assure fair taxation. That includes EU crypto providers sharing reports about their clients and their holdings.
Those crypto providers (like exchanges) don’t even need to be based on the region. They’d need to comply with the directive as long as they serve EU citizens. Besides, reports would also work to ensure compliance with economic sanctions against Russia. As they expliqué:
“Well functioning and coordinated reporting (…) are further needed to improve the conditions for taking necessary action to enforce sanctions against Russia. This increases the urgency and highlights the importance of introducing provisions to ensure that information related to both holding, and transactions of crypto-assets are reported and exchanged among Member States.”
The measure gained a lot of criticism among the crypto community. These EU crypto laws would practically erase client privacy, not to mention the worries about data leaks. All that information gathered in the same place could lead to severe breaches used by cybercriminals to attack the involved users. The compliance costs for companies would also increase exponentially.
For now, the directive will be open for feedback during the next eight weeks. After that, the responses will be discussed with the European Parliament and Council.
Upcoming EU crypto laws
Before new proposals, we must remember that the MiCA law is almost here as well. This new framework will mainly affect the use of stablecoins, token issuers, and cryptocurrency companies. All of them will need to comply with some basic rules if they want to operate inside the EU or for EU citizens.
Remarkable points include that the Crypto Asset Service Providers (CASPs) should have at least a legal entity registered inside the EU. They’ll also need a minimum capital amount (between 50,000 to 150,000 EUR), a fully secure digital platform, a competent team, and if they’re token issuers, a very detailed whitepaper. All of them should comply with AML and CFT measures, and always provide transparent and truthful information to their clients.
Beyond all of this, they’re also studying ways to take advantage of the open nature of Ethereum to trace and oversee DeFi transactions. Some big NFT collections may be included as well in crypto regulations at some point in the future. Besides, after the FTX crash, the new laws may arrive much sooner than expected.
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