Regulation
The European Union is about to elect a new Parliament: here’s what it means for cryptocurrencies – DL News
- The election of 720 new lawmakers could mean changes to the EU’s carefully crafted crypto regime.
- Important cryptocurrency legislation awaits the new members of the European Parliament.
- Attention may shift to blockchain technology as the industry implements new laws.
Elections for the European Union begin on Thursday. For cryptocurrencies, this means that key lawmakers could lose their seats in the new 720-member parliament, and the political agenda for the sector will enter a period of change.
While cryptography emerged as a problem in the US presidential election, it remained a dormant topic in the European campaign.
Also over the past five years, the EU has methodically addressed the challenges posed by cryptocurrencies by adopting a global regime known as MiCA. At the same time, European leaders also created a small but symbolic body to oversee the implementation of the blockchain infrastructure.
A delicate balance
But how a new Parliament will pick up where the previous one left off remains an unknowable question until the dust clears after this weekend. Crypto experts are watching closely to see how lawmakers approach the delicate balance between regulation and innovation.
“There seems to be a recognition that while regulation is important and can be enabling, it can also go too far and be seen as a hindrance,” said Mark Foster, EU policy manager at the Crypto Council for Innovation. DL News.
The cryptocurrency industry will be looking for who will fill several key roles in the new Parliament.
For example, the Parliamentary Committee on Economic and Monetary Affairs has played a crucial role in amending and shaping cryptocurrency legislation over the past five years.
It takes the form of MiCA, which stands for Markets in Crypto-Assets regulations, as well as regulations to prevent money laundering.
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Each parliamentary commission has a chairperson who coordinates work within groups of several dozen legislators focused on specific areas.
Presidents also have a subtle role of influence during the so-called trilogue negotiations, the final and most meticulous segment of drafting laws shared between EU institutions.
The Civil Liberties, Justice and Home Affairs and Internal Market and Consumer Protection Committees have had an impact on cryptocurrency legislation.
The groupings of the Parliament
Other key jobs are coordinators of parliamentary parties spanning the entire political spectrum.
Coordinators assign legislative liaisons within the group, deciding who can lead negotiations on a bill.
While experts expect to see a shift towards the far right in the upcoming elections, the centre-right European People’s Party continues to occupy the largest share of the table. surveys.
The left-wing Socialist and Democratic group, whose MEPs have historically posed challenges to supporters of the cryptocurrency industry, is in second place.
Outstanding invoices
There are some pending bills that were not completed before the election. These bills will need a rapporteur or lead negotiator appointed in Parliament.
THE digital euroa controversial attempt to establish a digital currency run by the European Central Bank, will also need a new parliamentary leader in case German MEP Stefan Berger does not return to complete the process.
Other laws on payment services and financial data will also need a new MEP to take the lead.
The Payment Services Regulation will be important in determining whether issuers of fiat-backed stablecoins, or electronic money tokens, will have to comply with more onerous measures than those proposed within MiCA.
And the new composition of parliamentarians in the commissions could reformulate the work carried out in the last mandate to their liking.
DeFi versus tokenization
The European Commission should report on progress in decentralized finance and NFTs and assess any risks that ecosystems might pose for consumers and markets.
The MiCA framework largely excludes these two features of the cryptocurrency industry and focuses on service providers. Instead, the Commission will decide, based on the findings obtained, whether additional legislation is necessary.
The DeFi and NFT reports, which will include insights from European financial markets and banking regulators, are expected in December.
But potential political action on DeFi could be hampered by another trend eating away at the sector: tokenization.
“If we have huge banks and market infrastructure engaged in the tokenization of securities, debt instruments and deposits, that will have to have the right regulatory framework,” Foster said.
European legislation on cryptocurrencies
MiCA, which covers stablecoin issuers and licensing requirements for cryptocurrency companies to safeguard markets and consumers, will come into force in phases starting from the end of June.
Financial institutions, including crypto service providers, will also have to comply with strengthened IT security requirements starting in 2025 under the Digital Operational Resilience Act.
A DLT pilot project was another element of the European Commission’s digital finance package. It was designed to allow market participants to experiment with tokenized financial instruments, but it didn’t amount to much success.
Additionally, Europe has produced cryptocurrency-focused anti-money laundering rules to collect data on senders and recipients of transactions under the Funds Transfer Regulation.
Furthermore, a separate anti-money laundering regulation has also invaded crypto services as entities required to comply with the EU’s updated regime for the private sector.
Now, top officials are calling for a rollback of regulation and a chance for the tech and financial sectors to implement the fire hose of new laws thrown at them.
Blockchain, not cryptocurrencies
“What we’re going to see over the next five years, the length of this legislative cycle, is a greater focus on DLT and the underlying technology,” Foster said.
This could involve digital identity and decentralized wallets, or revamping financial market infrastructure with features like instant settlement to wipe out intermediaries.
And these lawmakers will have to approve the next heads of the European Commission, Europe’s executive arm.
EU budget
The next leaders of the European Commission will be nominated by EU member states and then elected by the European Parliament. This process will take place after the summer.
The new president of the European Commission, a job that could remain in the hands of current president Ursula von der Leyen, and the commissioners leading the financial and technology sectors will be responsible for any new legislation that may impact cryptocurrencies or blockchain.
The Commission also has an important role in allocating the EU budget towards its long-term objectives on digitalisation or sustainability.
This includes projects such as the blockchain infrastructure designed to support European administrations, dubbed Europeum.
It also includes other initiatives to upgrade internet infrastructure and digitize services or businesses.
“This is an important ingredient in enabling citizens to use Web 3 and crypto products and services,” Foster said.
Inbar Preiss is a regulatory correspondent based in Brussels. Contact her at inbar@dlnews.com.