(Bloomberg) — The European Union is seeking to speed up a push for new cryptocurrency rules amid concerns that the digital tokens could be used to circumvent sanctions on Russia following the invasion of Ukraine.
The European Parliament and member states discussed on Thursday the possibility of shortening the two-year implementation period for proposed EU rules known as the markets in cryptoassets (MiCA) during the first round of talks to finalize it, an EU official said.
When EU officials proposed shortening the timeframe to implement new crypto rules earlier this week, countries including Ireland, Spain, Poland and Luxembourg were open to the idea, according to people familiar with the discussion.
EU countries and Group of Seven allies are concerned that crypto assets could be used by Russian oligarchs to evade sanctions imposed since President Vladimir Putin invaded Ukraine. Although there hasn’t been a significant increase in the volume of transactions, the European Central Bank and governments insist that the proposed MiCA regulation would help to avoid the risk.
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EU negotiators are on board with the need for a quick agreement, people familiar with the discussion said. But the sides disagree over some important issues that may prolong the talks, an EU official said.
MiCA was proposed in September 2020 to regulate cryptoassets, with the aim of ensuring financial stability and consumer protection across the bloc with the same rules. The European Commission has said that the current absence of EU regulations on the crypto sector leaves consumers and investors exposed to substantial risks.
One outstanding issue in the current talks is the environmental safeguards that EU lawmakers want to introduce. The European Parliament proposed including cryptoassets in the EU’s taxonomy of “green” activities to monitor whether they have been mined in accordance with the bloc’s sustainable principles.
Some political groups, including the Greens, wanted to go further and initially proposed banning energy-intensive mechanisms underpinning some tokens that would have led to the exclusion of Bitcoin and other assets from the European market.
Ireland, Sweden, Poland and Spain were open to including some climate-related provisions, people familiar with the discussion said. But an EU official cautioned that it would be harder to convince a majority of member states to take these new safeguards on board as they were not part of the original negotiating mandate.
Crypto Oversight
Another bone of contention is the supervisory architecture. The original plan offered by the EU’s executive arm, and supported by member states, envisioned EU oversight of significant stablecoins, as well as e-money tokens based on single currency. The European Parliament expanded the scope by adding crypto-asset services providers under the EU umbrella.
The European Commission and member states suggested making the European Banking Authority responsible for the bulk of the supervision, while the Parliament proposed a split: The European Securities and Markets Authority would monitor stablecoins, while the EBA would regulate e-money tokens.
In a parallel debate, two European Parliament panels on Thursday backed a proposal that would require crypto transfers to carry information about the identities of payers and payees. The EU is discussing it as part of an anti-money laundering push to prevent crypto-assets from being used to facilitate criminal transactions. EU lawmakers also proposed the inclusion of these clauses in the MiCA package.
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