Author: Aleksandar Kokotović

Europe’s comprehensive crypto legislation is being adopted. Here’s what you need to know.

The European Union’s Markets in Crypto Assets Regulation (MiCA), a legislation that aims to “harmonize the European framework for the issuance and trading of various types of crypto tokens as part of Europe’s Digital Finance Strategy,” which has been in the works for years, is finally ready. It has caused plenty of discussions, some controversy and has been feared — but also welcomed — by the crypto industry. Let us look into the process that led us here, what is still to come, and why this piece of legislation might be one of the most significant and comprehensive that we have seen in crypto yet.

MiCA, which will be applicable across all the member states in the European Union as well as with all businesses operating in the EU, has been in the works since early 2018. It first came into discussion following the bull market of 2017, a heady time where Bitcoin was making its new highs, a thousand tokens started flourishing amid Initial Coin Offerings (ICOs) out of which more than half failed less than 4 months after the offering. 

The European Commission published its Fintech Action Plan in March 2018 and gave the mandate to the European Banking Authority (EBA) and European Securities and Markets Authority (ESMA) to review if the existing EU financial services regulatory framework applied to crypto assets. After deciding that most crypto assets are outside of the scope of current financial regulations, regulators began working on a new framework under the Digital Finance Package which eventually became MiCA. Since its initial inception, the crypto market went through a bear market, reaching its bottom in the early days of the pandemic followed by another bull market before taking a downward trend again in late 2021. New regulatory fears were ignited in the first two quarters of 2022 followed by events such as the Terra Luna stablecoin collapse and Three Arrows Capital and Celsisus bankruptcies. 

In such a fast-paced environment, it is not difficult to understand that MiCA’s scope had to evolve from its original conception. NFTs barely existed when the legislation was first being conceived, DeFi summer was nowhere in sight and Meta was still called Facebook and working on its much scorned Libra project (remember that one?). Creating a legal framework that would provide legal certainty for both investors and issuers in that sort of fast pace environment was not easy, and the regulators have been back to the drawing board a few times. What we have in front of us now will be the largest piece of legislation around crypto thus far. 

One of the major rules that will affect the industry is the requirements set for Crypto Asset Service Providers (CASPs) and investment firms and anyone providing custodial services. They will be liable for any loss of customer funds unless they are able to prove it was a result of events beyond their control. A number of measures deal with preventing insider trading and market manipulation. 

In the process of formulating MiCA, a number of heated discussions were held on proof-of-work, so called ‘mining’, and potential environmental effects of this practice. Even with significant pressure coming from certain groups, the legislators rightfully steered away from any potential bans on proof-of-work. However, actors in the crypto market will be required to declare information on their climate footprint. 

When it comes to decentralized financial protocols, they are not in the scope of MiCA and the European Commission will be publishing a separate report on them in 2023.

A large concern and a great deal of debate during the process of writing MiCA was focused on stablecoins. Following concerns expressed by the Council, additional restrictions on the issuance and use of stablecoins have been added to the legislation. Notably, MiCA has expressed the view that stablecoins could pose a threat to monetary sovereignty and opined that “central banks should be able to request the competent authority to withdraw the authorisation to issue asset-referenced tokens in the case of serious threats”. 

Asset referenced tokens (ARTs) as noted in the legislation should be redeemable at purchased price at all times, which more or less makes any non-fiat denominated stablecoins not viable to launch, making it almost impossible for innovation in that field to take place and stripping away European consumers from participating in such potential investments. Together with issuance caps and limits on large scale payments for non-euro denominated stablecoins, this creates a confusing and not consumer-friendly environment when it comes to these tokens.

Even with all the updates and desire to keep up with the developments in the crypto industry, MiCA does not cover some very important parts of the crypto economy today. NFTs are mostly outside of the scope of this legislation. However, EU parliament members argued that many NFTs are actually used as financial instruments and could be subject to different standards. Fractionalized NFTs on the other hand, as well as “non-fungible tokens in a large series

or collection should be considered as an indicator of their fungibility” and will be treated not as unique crypto assets similar to digital art or collectibles. 

The assets or rights represented by the NFT should also be unique and non-fungible for the asset to be considered as such. The fact that national enforcers could take inconsistent views on whether an asset can be considered non-fungible or not, if it requires a whitepaper or how exactly will it be regulated is something that should be of concern as it could potentially create many inconsistencies and concerns both for issuers and consumers. The EU is expected to publish another report on NFTs bringing more clarity to this area.

After the linguists are done with the final version of the text, the expectations are that MiCA will appear in the official journal sometime around April 2023, which would mean that stablecoin rules will start applying in April 2024 and CASP rules will be applied starting from October 2024. Considering the European Union is the third largest world economy, the effects of this legislation will have a broad impact on the industry, on retail consumers and investors, and definitely have some swway on other regulators around the world.

Having the European Union on the forefront of regulation of tech innovation is something that we have not seen much in the past. With MiCA being adopted, it will be up to the industry and consumers to make sure that the measures introduce certainty and allow for more innovation to flourish. Also, if those priorities stick, that these measures are copied and applied elsewhere. Either way, a long and exciting journey is ahead for everyone — regulators, investors and the broader crypto community.

EU’s Bitcoin and Cryptocurrency Surveillance Rules to Harm Consumers

The European Union’s final trialogue between Council, Commission, and Parliament has finished crafting the first part of legislation that makes up the new EU anti-money laundering package aligned with the Markets in Crypto-assets rules (MiCA).

These rules are drafted following recommendations from the so-called Travel Rule of the Financial Action Task Force (FATF), a global treaty organization that combats money laundering. The aim of this rule is to effectively track financial assets, and included crypto assets like Bitcoin and other cryptocurrencies beginning in 2019,

The EU’s proposed rules introduce regulations that are far from technologically neutral, are detrimental to innovation, and will harm consumers who depend on cryptocurrency services.

Crypto asset service providers are obliged to keep records and provide traceability from the first euro compared to traditional finance where that requirement is set for transfers larger than 1000 EUR.

Crypto asset service providers will be required to collect information and apply enhanced due diligence measures with respect to all transfers involving non-custodial wallets. A number of risk-mitigation measures will be in place for cryptocurrency exchanges before establishing a business relationship with exchanges in third countries. 

Putting such stringent regulations on non-custodial wallets, together with introducing strict and complicated measures for cryptocurrency exchanges, will introduce unfavorable conditions for the growing industry and will cause a number of businesses to be forced and move their operations abroad – depriving consumers of their ability to safely and securely enjoy crypto services.

Putting these high regulatory costs in place is already influencing the decision-making of crypto asset service providers, now considering changing jurisdictions and moving to more favorable ones. These ham-handed regulations won’t only affect the industry, but many of the consumers who rely on them, pushing them to use non-EU exchanges. 

We have seen consumers voting with their feet in the past, choosing service providers in different countries to avoid similar measures, and this will be no exception.

With more Orwellian stipulations requiring that a consumer who sends or receives more than 1000 EUR to or from their own non-custodial wallet be verified by the crypto exchange, we will be seeing a number of issues arising both for the industry as well as for the consumers, putting additional costs to all transfers. 

The European Union has been criticized in the past for its overregulation especially when it comes to innovative technologies. Even though the EU has been relatively early in creating a comprehensive legal framework for cryptocurrencies, a number of the regulations agreed on will undoubtedly bring harm to both the industry and the retail consumer.

Surveillance of each consumer coupled with copious regulations aimed at crypto asset service providers will once again leave EU citizens looking for alternatives within jurisdictions more open to innovation, decentralization, and consumer-orientated regulatory frameworks.

The entire point of cryptocurrencies is to provide an alternative to the government-controlled fiat money system. These rules aim to disrupt that aim, principally by forcing industry players to comply with even stricter rules imposed on traditional finance institutions.

There is a better way to do this in order to promote innovation, protect consumers, and create a better ecosystem that will benefit all Europeans.

Our Principles for Smart Cryptocurrency Regulations policy primer is available to all regulators, and offers core principles to uphold in order to create regulatory guidance for the nascent industry without hurting innovation.


  • Prevent Fraud
  • Technological Neutrality
  • Reasonable Taxation
  • Legal Certainty & Transparency

The temptation to regulate cryptocurrencies and the blockchain economy based on financial considerations alone, rather than the innovative potential, is an active threat to entrepreneurs and consumers in the crypto space.

Penalizing first-movers in crypto innovation or subjecting them to outdated laws will only serve to limit the unparalleled economic growth currently provided by the sector, or risk pushing all investment and entrepreneurship to less reliable and lawful jurisdictions.

The policy primer can be read in full here

The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.

If you would like to help us defeat harmful Bitcoin and cryptocurrency regulation, also using crypto, consider investing value in the Consumer Choice Center via our Donate page.

New Yorkers need prudence, not bans, on Bitcoin and cryptocurrency mining

On May 24, 2022, the Consumer Choice Center sent a letter to New York state lawmakers, warning of the potential consequences to consumers if bill S6486D was adopted, a moratorium on Bitcoin and cryptocurrency mining.

The full letter is available below, or in PDF version here.

Dear Senators,

We write to you to urge you to vote against S6486D, a companion bill to A7389C, which would order a state-wide moratorium on cryptocurrency generation or mining.

If passed, this bill would be a death blow to the Bitcoin and cryptocurrency industry, resulting in thousands of jobs lost in New York, a loss of capital to scale up renewable energy, and would harm all potential benefits to consumers from cryptocurrency projects and initiatives. 

The aim of embracing climate goals to ensure 100% renewable energy usage in cryptocurrency generation and mining is well-intended, but a complete ban will have a devastating impact on innovators and entrepreneurs hosting their facilities in the state of New York, and consumers and investors that rely on their services.

As a consumer group, it may seem odd for us to weigh in on a topic that affects mostly industry players and firms. However, because we believe that Bitcoin, and cryptocurrencies more broadly, will serve a vital role in making finance and economics more inclusive and accessible for sending, receiving, and saving value, we hold it in the interest of consumers that the hashrate (the total computing power of the network) continue to grow, and that better public policy on cryptocurrencies is embraced among state legislatures.

If the Bitcoin hashrate grows specifically in the United States, then we will have more control in how mining develops and how it can benefit the country, its citizens, and our energy grids.. This last part is vital for climate goals, which cannot be said for China or other nations.

According to the latest figures from the first quarter of 2022 on Bitcoin mining specifically, 58.4% of miners are using renewable energy sources, and that number has only increased in several years. In New York, many firms are retooling abandoned processing and power generation plants to build cryptocurrency data centers, and are providing economic value in return that is putting renewable energy to work.

What’s more, this wide-ranging energy diversification is happening at a pace faster than any other industry, leading to more investment in renewable energy capacities and delivery systems. This increased demand is leading to more environmentally favorable energy delivery for customers of all public electricity utilities, and will also help bring down costs. And this is being carried out due to the incentives of firms and individuals who participate in adding hash rate to mining: they want to lower their costs and find better alternatives. 

Cryptocurrency generation and mining firms have an incentive to use the most affordable and renewable energy sources available, and the data backs up this claim. This is a win-win scenario for towns and localities with these facilities, for employees of these firms, residents in these towns that benefit from increased commerce, and energy customers overall.

As cryptocurrency mining has proliferated in New York, it has opened up new entrepreneurial activities that will help improve the lives of New Yorkers in small communities and large urban centers alike. Entertaining a ban on these activities, in pursuit of an unclear climate goal, will negate these gains. There is a better path.

It should not surprise you to know that New York’s previous policy decisions, including the highly criticized BitLicense, have locked many New Yorkers out of the new cryptocurrency ecosystem due to the high compliance costs. Some New Yorkers have chosen to change residences in order to acquire cryptocurrency or to invest in crypto businesses, which they can do in any other state, but more specifically Texas, Wyoming, and Florida.

If this moratorium on cryptocurrency generation comes to pass, it will be yet another signal to entrepreneurs and consumers that Bitcoin and other cryptocurrencies are not welcomed in New York, and the regulatory framework is too unfavorable to justify investing here.

A number of industry organizations, communities, and unions have already expressed their concerns about the impact this bill would have on their families and livelihoods, fearing potential job loss in case industry gets driven away from the state as a result of this legislation. The loss of future investments and new jobs is another concern expressed by many communities in cities such as Rochester, Albany, and Syracuse.

According to the May 2022 Empire State Manufacturing Survey, the general business conditions index has dropped thirty-six points statewide. The last thing many affected and marginalized communities need is a moratorium that would drive businesses away from the state, and keep millions of New Yorkers from being included in a new system of value.

We understand that the quick rise of cryptocurrency mining raises many questions for residents, particularly when it involves the local economy and environment. However, a more prudent path would be an environmental review conducted by relevant authorities, rather than a wholesale ban and moratorium that would put many projects in legal jeopardy.

As consumer advocates, we are strongly opposed to this bill. We believe that New York residents deserve a chance to take part in the nascent industry that so many other states are hoping to accommodate. Using the force of regulation to drive away investments and jobs, stop economic progress, and shut out millions of New Yorkers from a more inclusive financial system would not only be wrong, but it would also be negligent.

Please vote No on S6486D aiming to place a moratorium on proof-of-work and help New York become a hub of innovation that embraces new technologies. New Yorkers should have the opportunity to participate in one of the biggest innovations of our age. With your vote against this bill and a more prudent direction, we can ensure that will happen.

Sincerely Yours,

Yaël Ossowski

Deputy Director

Aleksandar Kokotovic

Crypto Fellow

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