The European Union Proposes Stricter Rules for Crypto Asset Service Providers
The European Union (EU) is planning to introduce new regulations that would require crypto asset service providers to undergo rigorous vetting of their shareholders and board members. These rules are part of the Markets in Crypto Assets regulation (MiCA), which aims to establish a unified framework for crypto activities across the EU.
MiCA’s Regulatory Requirements for Crypto Entities
The MiCA regulation is set to be implemented in December 2024 and will cover crypto assets that are not currently subject to other EU financial regulations. It aims to create a comprehensive framework for crypto issuers, service providers, and users, focusing on authorizations, supervision, consumer protection, market integrity, and financial stability.
Ownership and Governance Requirements
The proposed regulations state that shareholders with a qualifying share (more than 10% of capital or voting rights) must be fit and proper, with no prior convictions related to money laundering or terrorist financing. Board members should also possess the necessary knowledge, skills, and experience for their roles and act with honesty, integrity, and independence.
Additional Requirements for Crypto Asset Service Providers
Crypto asset service providers will also need to establish internal control mechanisms, risk management systems, compliance functions, audit functions, and remuneration policies. They must disclose their crypto exposures and define business lines based on MiCA categories. Failure to meet these requirements may result in the withdrawal or suspension of authorization by regulators.
Hot Take: Stricter Regulations Aimed at Responsible Crypto Operations
The proposed regulations by the European Union reflect a growing focus on responsible operations within the crypto industry. By imposing stricter rules regarding ownership and governance, the EU aims to ensure that crypto asset service providers operate responsibly without posing risks to the financial system or public welfare. These regulations, if implemented, will contribute to the overall stability and integrity of the crypto market in the EU.
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