EU Shows its Intent to Become a Global Leader in Crypto as it Votes through MiCA

Earlier today, the European Parliament’s ECON Committee voted on the Markets in Crypto Assets Regulation, voting down references to phasing out consensus mechanisms that did not meet a new criteria of minimum environmental sustainability standards and instead approving the rapporteur’s compromise and giving him a mandate to go straight through to trilogues.

Much anticipated for providing a comprehensive framework for the EU, in recent weeks the file gained attention for the inclusion of text that banned proof-of-work consensus mechanisms on the grounds of energy consumption. A concerted industry effort resulted in a delay in the vote which was scheduled for 28 February and instead the Rapporteur revisited the text removing references to this, to ensure that the EU remained competitive and stayed true to its intentions to ‘foster innovation’.

That being said, an alternative compromise text was proposed by the Greens and S&D which included the proposal to phase out consensus mechanisms which did not meet minimum environmental sustainability standards. This criteria would be determined through delegated acts with: the intensive consumption of energy; the use of real resources; carbon emissions; electronic waste; the specifics of incentive design; and, the scale of operation of the crypto asset being the attributing factors. This text was voted down, with the majority of the ECON Committee voting through the rapporteur’s proposal.

The file was voted through with the rapporteur being given a mandate to take this straight through to trilogues.

Lavan Thasarathakumar Director of Government and Regulatory Affairs at GDF says:

“This is fantastic news for the crypto asset industry but also important for the EU in its bid to produce a comprehensive framework for crypto assets and become a global hub.

The signal is clear. The EU wants to conclude this file and provide the right environment for crypto to flourish, whilst ensuring that adequate protections are in place.

MiCA will now go through to trilogues and given its interest we expect there to be a push to complete this under the French presidency but failing that for it to be concluded early in the Czech presidency.

This mandate has importance beyond the immediate text, other files such as the Transfer of Funds recast (the EU’s Travel Rule implementation) are contingent on the conclusion of this file. With this file not being held up in plenary, we are even closer to being able to provide the clarity that will enable industry to provide compliant products and services in the EU.

Consumption of energy is an extremely important topic and one that needs to be addressed but this needs to be done horizontally i.e. On a cross sector, cross industry basis and not on a product specific one. The proposed alternative text did not have a place in MiCA and would have led to inconsistencies in regulatory approaches across different industries. The proposal also threatened unintended consequence of banning whole products and services across the EU, which is not the intended message of this proposal.”