Global regulators are taking a gradual approach to establish rules and standards for the cryptocurrency space. It looks like that order for transparency and clarity is the common direction of authorities, including the European Union (EU).
During the Korean Blockchain Week 2022, Peter Kerstens, European Commission’s adviser, outlined the Markets in Crypto Assets (MiCA) bill and what it could mean for non-fungible tokens (NFTs).
Fully Collateralized Stablecoin
Kerstens said at Tuesday’s panel talk that the MiCA bill would prevent collapses like Terra’s. Under MiCA’s watch, stablecoin projects will be required to provide greater transparency and asset redemption ability as requested.
The Terra-LUNA left the market with severe damage as the entities involved followed in rapid succession. The EU official explained that MiCA aims to protect European investors against Terra-scheme projects by preventing, “such schemes from coming onto the market.”
Issuers of stablecoins like Tether and other unbacked crypto-assets are required to meet the landmark law in order to run business in Europe.
The framework consists of the issuance of white paper, authority registration, and for stablecoins, fully collateralized reserves to meet redemption requests in the event of mass withdrawals.
The provisional agreement on MiCA, which is the result of a nearly two-year discussion, was secured in June by the two legislative bodies of the European Union (EU) – the Council of the European Union announced that the Council Presidency and the European Parliament.
The crypto-assets market has long been fragmented and volatile while the legal enforcement is still uncertain. Although worldwide authorities need a long period of research to come up with a suitable legal framework, the current circumstance represents an urgent call to regulation.
Terra’s collapse pushed South Korean officials to make a full set of crypto laws. The Digital Asset Basic Act, according to South Korean regulators, will adopt ideas from the United States and Europe, specifically MiCA, “to improve global consistency” in crypto regulation.
NFTs Under MiCA
Non-fungible tokens (NFTs) 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 as a series,” despite the unique aspect of that series or that collection.
EU’s MiCA requires absolute clarity of NFT collection, which means the details of the underlying protocol applied to the NFTs are included in the white paper. Any misleading information and false promises about the future value are forbidden.
Adding NFTs to the scope of MiCa, however, is controversial. EU national governments thought it would be an unwarranted expansion of a bill that was meant to protect Europeans in stablecoins and initial coin offerings.
European Parliament policymakers, on the other hand, stated that price manipulation like wash trading makes the NFT market vulnerable.
A white paper for every NFT is a “silly” idea, according to Kerstens’ previous statement. And that idea would provoke concerns about its side effect on NFT platforms like OpenSea & Looksrare – it’s a dealbreaker for innovation in the industry.
The initial version of MiCA was drafted in the year 2020 by the European Commission, which is the principal governing body of the EU.
Since then, it has been helpful in discussions between the Council of the EU and its Parliament over how to alter the law. MiCA bill, which hasn’t yet become a law, is expected to come into force in 2023-2024.
A Global Movement
The South Korean government has not yet made up its mind about how it will manage the cryptocurrency and blockchain asset market. It’s possible that how the European Union and the United States respond to the situation will have a significant impact on where things go from here.
Crypto and blockchain technology have posed a series of challenges for policy making, including financial supervision regulations, consumer protection, and tax administration while at the same time incentivizing and facilitating innovation.
The goal is to conduct the most effective measures in crypto operational management to comply with anti-money laundering program commitments, consumer protection laws, and financial supervision.