MiCA approved with no PoW ban

As expected, on 30 June came the approval of the Markets in Crypto Assets regulation, also called MiCA, and – fortunately – it does not include any bans for Proof of Work or mining.

The first news came from Member of the European Parliament Stefan Berger, who made a series of posts on his Twitter profile.

MiCA Trilog: Durchbruch! Europa ist der erste Kontinent mit einer Krypto-Asset Regulierung. Parlament, Kommission & Rat haben sich auf ausgewogene #MiCA geeinigt. Für mich als Berichterstatter war wichtig, dass es hier keine Verbannung von Technologien wie #PoW gibt /1

— Stefan Berger (@DrStefanBerger) June 30, 2022

In the post Berger explains that he too is happy to have no ban for mining:

“Europe is the first continent with cryptocurrency regulation. Parliament, Commission and Council agreed on a balanced MiCA. For me as a journalist, it was important that technologies like PoW not be banned”.

This does not mean, however, that operators will not have to care about the environment. Indeed, in a second tweet, Berger clarifies:

“Crypto-asset providers will in the future have to disclose energy consumption and resource impact on the environment. The basis for this will be regulatory technical standards”.

European Parliament member Ernest Urtasun also weighed in on Twitter, explaining that all cryptocurrency service providers will be obligated under AML regulations, including crypto ATMs. 

The differences between custodial and non-custodial platforms

Obviously these laws will not apply for peer-to-peer transactions, that is, without intermediaries and completely decentralized. Although, it is explained, there will be different rules for non-custodial wallets.

2/12 All crypto-asset service provider become obliged entities under AMLD. Crypto-ATMs are captured by the rules. The travel rule for crypto will apply to all transactions from/to CASPs from the first euro.

— Ernest Urtasun (@ernesturtasun) June 29, 2022

For MiCA, the laws will also apply to transfers to/from wallets and companies will be required to collect information and apply enhanced due diligence measures with respect to all transfers involving non-custodial wallets.

The tweets also reveal that the rules include:

“Verification of the identity of the beneficial owner of the unhosted wallet will be mandatory for large transfers above 1000€ in case the transfer is made to or from the wallet belonging to the CASP’s own client”.

5/12 Verification of the identity of the beneficial owner of the unhosted wallet will be mandatory for large transfers above 1000€ in case the transfer is made to or from the wallet belonging to the CASP’s own client.

— Ernest Urtasun (@ernesturtasun) June 29, 2022

But the coup de grace comes in another tweet, where Urtasun explains that the rules may be strengthened soon:

“By 18 months after the entry into application, the Commission will assess the need to review de regulation to add measures to mitigate the risk of unhosted wallets”.

Increased measures to also hamper Russian oligarchs

Specifically, Urtasun further explains that these rules also want to get more control over Russian oligarchs, so that they have a harder time spending using cryptocurrencies.

7/12 CASPs will be required to adopt internal policies, procedures and controls to ensure compliance with targeted financial sanctions. This is very relevant as Russian oligarchs use crypto to circumvent EU and international sanctions.

— Ernest Urtasun (@ernesturtasun) June 29, 2022

“CASPs will be required to adopt internal policies, procedures and controls to ensure compliance with targeted financial sanctions. This is very relevant as Russian oligarchs use crypto to circumvent EU and international sanctions”.

Initial reactions to MiCA

Regulations, norms and rules. Clearly, no trader or user in the crypto world is happy about this. In fact, underneath the posts by different members of Parliament, we find several tweets expressing disgust.

These include, for example, that of analyst and trader Plan B who believes that Europe is killing innovation in this way.

Europe, leaders in killing innovation pic.twitter.com/7WiPQJE05R

— PlanB (@100trillionUSD) June 30, 2022

The paradoxical concept behind these rules is also very well explained by Twitter user @bazzle who explains:

“So, if I receive bitcoin on my cold wallet, the sender must keep my personal details on their database? ready to be hacked? and sold on the dark web. and this is a good thing? explain how”.

In fact, from what we see is that no one is safe anymore and everyone will be tracked for even sending a BTC transaction from a non-custodial wallet to a custodial wallet. So one will have to be careful what platform the recipient of a transaction is using. 

The underlying issue here is definitely privacy. Frequently, those who decide the rules are unable to conceive that those who want privacy don’t necessarily want it because they are operating illegally. Consequently, according to lawmakers, those who want to protect their data would have something shady to hide. Needless to say, the facts are different.