EU crypto legislation to alleviate events like FTX collapse November 9, 2022
EU crypto legislation to alleviate events like FTX collapse<br><br><br>
EU crypto legislation to alleviate events like FTX collapse
In a recent series of events, Binance proposed to acquire FTX after its collapse and to bring a lifeline by ending its liquidity crunch. Several EU regulators and experts are coming forward and are opening up about the pan-European crypto legislation, Markets in Crypto Assets (MiCA) provisions. According to them, the new digital asset legislation will reduce such collapses in the future.
Stefan Berger, a social-liberal member of the European Parliament, also a lead negotiator on the Markets in Crypto-Assets legislation said, “The crypto space is not a gambling casino, MiCA is the bulwark against Lehman Brothers moments such as the FTX case.”
He even took to Twitter to talk about what MiCA is for after FTX’s failure, “Shame! The #FTX/#Alameda case has cost enormous trust. Such Lehman Brothers moments must be prevented in the crypto space. That’s exactly what #MiCA is for. Crypto assets are not play money. Crypto asset service providers must ensure internal risk management mechanisms.”
Berger also pointed out that MiCA has a provision in which clients’ assets are segregated from funds, the legislation will provide transparency to clients, and put in place internal control mechanisms.
“Just like banks, crypto asset service providers need mechanisms that ensure risk management,” continued Stefan Berger.
Various cryptocurrencies rattled amid the proposed change of ownership of FTX when CEO Sam Bankman-Fried dropped the news on the crypto industry saying that the exchange’s non-U.S. assets would be sold to Binance.
Dimitris Psarrakis, a former European Parliament policy specialist and current advisor on several crypto legislations in the EU institutions said, “This is very bad for the industry. I suspect that this story was super informative for the regulatory authorities.”
As the new laws are expected to be enforced by the European Union in 2024, they will pass comprehensive legislation on crypto assets and their service providers. So, till then financial regulators may have to themselves sort out the ways in which they can apply regulations. However, the European Securities and Markets Authority will be the main regulatory body to charge of providing more information about rules on crypto asset service providers.
Pan-European crypto legislation, Markets in Crypto Assets legislation set out cost-effective requirements for crypto asset service providers, such as investor protection, market integrity, exchanges, and covering capital requirements. The ways in which a crypto firm can be wind-down have also been outlined in the legislation.
Dimitris Psarrakis further claimed, “I suspect that the supervisory authorities now drafting the delegated acts will reach Title V, taking into account what happened in order to prevent market failures like that in the European setting in the future.”
Director of a Brussels-based crypto lobbying group, Robert Kopitsch says that there is a silver lining to the FTX acquisition, “From a political perspective, I can say that it’s always positive if mergers lead to more consumer protection, better services, and more security. That’s the ideal outcome.”