Regulation
The European Union is about to elect a new Parliament – here’s what it means for crypto – DL News
- The election of 720 new lawmakers could mean changes for the EU’s carefully designed crypto regime.
- Important crypto legislation awaits new members of the European Parliament.
- Attention may shift to blockchain technology as the industry implements new laws.
The European Union elections begin on Thursday. For crypto, this means that top lawmakers could lose their seats in the new 720-member parliament, and the sector’s political agenda will enter a period of change.
While crypto has emerged as a issue During the American presidential election, this subject remained a dormant subject in the European campaign.
Over the past five years, the EU has methodically addressed crypto asset challenges by adopting a comprehensive regime known as MiCA. At the same time, European leaders also implemented a small but symbolic body to oversee the deployment of blockchain infrastructure.
A delicate balance
But how a new Parliament will pick up where the previous one left off remains an unknowable question until the dust clears after this weekend. Crypto experts are closely watching how lawmakers approach the delicate balance between regulation and innovation.
“There seems to be a recognition that while regulation is important and can be enabling, it can also go too far and be seen as a blocker,” said Mark Foster, head of European policy at the Crypto Council for Innovation . DL News.
The crypto industry will be looking for who will fill several key roles in the new Parliament.
For example, Parliament’s Economic and Monetary Affairs Committee has played a crucial role in amending and developing crypto legislation over the past five years.
This gave rise to MiCA, which stands for regulation of crypto-asset markets, as well as rules to prevent money laundering.
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Each parliamentary committee has a chair who coordinates work within groups of several dozen legislators focused on specific sectors.
Presidents also play a subtle influential role during so-called trilogue negotiations, the final and most meticulous segment of shared lawmaking between European institutions.
The committees on Civil Liberties, Justice and Home Affairs, and Internal Market and Consumer Protection have had an impact on crypto legislation.
Parliament groups
Other key jobs are those of Parliament party coordinators spanning the political spectrum.
Coordinators distribute legislative reports among the group, deciding who will lead negotiations on a bill.
While experts expect a swing to the far right in the upcoming elections, the center-right European People’s Party remains in the majority in the elections. polls.
The left-wing Socialists and Democrats group, whose MEPs have consistently posed challenges to crypto industry advocates, came in second.
Pending invoices
A few bills are pending and have not been finalized before the election. These bills will require a designated rapporteur or lead negotiator in Parliament.
THE digital euroa controversial attempt to create a digital currency managed by the European Central Bank, will also need a new parliamentary leader if German MEP Stefan Berger does not return to complete the process.
Other legislation on payment services and financial data will also need a new MEP to take the lead.
The Payment Services Regulation will be important in determining whether issuers of fiat-backed stablecoins, or e-money tokens, will have to comply with more onerous measures than those proposed in MiCA.
And the new makeup of lawmakers on committees could reshuffle the work done over the last term as it sees fit.
DeFi versus tokenization
The European Commission should report on progress on decentralized finance and NFTs, and assess the risks that ecosystems may pose to consumers and markets.
The MiCA framework largely excludes these two features of the crypto industry and focuses on service providers. Instead, the Commission will decide, based on its findings, whether additional legislation is necessary.
The DeFi and NFT reports, which will include information on European financial markets and banking regulators, are expected in December.
But potential political action on DeFi could be thwarted by another trend devouring the sector: tokenization.
“If we have huge banks and market infrastructures going into tokenization of securities, debt instruments and deposits, this will need to be surrounded by a proper framework,” Foster said.
European legislation on cryptography
MiCA, which covers stablecoin issuers as well as licensing requirements for crypto companies to protect markets and consumers, will go live in stages starting at the end of June.
Financial institutions, including crypto service providers, will also have to comply with enhanced IT security requirements starting in 2025 under the Digital Operational Resilience Act.
A DLT pilot project was another element of the European Commission’s Digital Finance package. It was designed to allow market participants to experiment with tokenized financial instruments, but was not very successful. success.
Additionally, Europe has developed crypto-focused anti-money laundering rules to collect data on senders and recipients of transactions under the Fund Transfer Regulation.
Additionally, a separate anti-money laundering regulation also included crypto services as entities required to comply with the updated EU regime for the private sector.
Now, top officials are calling for a slowdown in regulation and a chance for the technology and financial sectors to implement the new laws thrown at them.
Blockchain, not crypto
“What we’ll see over the next five years, for the duration of this legislative cycle, will be more focus on DLT and the technology behind it,” Foster said.
This could cover identity and decentralized digital wallets, or revamping financial markets infrastructure with features like instant settlement to eliminate middlemen.
And these lawmakers will have to approve the next leaders of the European Commission, Europe’s executive arm.
EU budget
The next leaders of the European Commission will be nominated by EU member states and then elected by the European Parliament. This process will take place after the summer.
The new president of the European Commission, a position that may well go to outgoing President Ursula von der Leyen, and commissioners leading the financial and technology sectors will be responsible for any new legislation that could impact crypto or blockchain .
The Commission also plays an important role in allocating the EU budget to its long-term digitalization or sustainability goals.
This includes projects such as the blockchain infrastructure designed to underpin European administrations, dubbed Europeum.
This also includes other initiatives to update internet infrastructure and digitize services or businesses.
“This is an important ingredient in enabling citizens to use Web 3 and crypto products and services,” Foster said.
Inbar Preiss is a regulation correspondent based in Brussels. Contact her at inbar@dlnews.com.