September 24, 2022

The European Union’s draft law on the Market for Crypto Assets (MiCA) has reportedly been finalized and left open for comments.

While the bill mostly focused on stablecoins and was mostly silent on non-fungible tokens and decentralized financial industries, the implicit inclusion of non-fungible tokens in the latest draft could catch enforcers napping.

Leaked on September 20, 2022 now bill encourages enforcers to consider a “substance over form” strategy, meaning that certain tokens such as NFTs with some degree of fungibility could fall under the purview of the account. This is despite the law primarily dealing with fungible crypto assets making no mention of NFTs.

Critical wording in the bill’s introduction, called the Recital, reveals that certain NFTs that are part of a large collection could be considered “fungible” and therefore subject to the law’s provisions.

The recital is an echo of the EU’s press release earlier this year, announcing the provisional agreement reached by the Presidency of the European Council and the European Parliament on the draft law on MiCA. “Non-Fungible Tokens (NFTs), i.e. digital assets that represent real objects such as art, music and videos will be excluded from the scope unless they fall under the existing categories of crypto assets,” the press release said. noticed.

The bill also requires companies like exchanges and other providers of crypto assets to adhere to strict consumer protection practices and to be responsible for any consumer losses. It also limits stable transactions to 200 million euros per day. Stablecoin issuers should ensure a minimum of sufficient liquidity.

Work on MiCA began in 2018 after the crypto boom of 2017.

Binance CEO welcomes new law

Binance CEO Changpeng ‘CZ’ Zhao reacted positively to the news that MiCA is more or less finalized. “Good news from Europe. The latest MiCA draft has removed previous restrictions on non-euro stablecoins. Liquidity is the best protection for users,” he said tweeted.

CZ also praised the recent crypto framework released by the White House that has a similar bias toward robust consumer protection measures and addresses stablecoins from the standpoint of the asset’s potential threat to financial stability.

Subsequent reports released by the US Department of Justice revealed new crypto law enforcement initiatives, including a network of expert lawyers trained to investigate and prosecute national crimes.

There is still no clarification on the status of crypto security

The legislative process surrounding MiCA will need approval by the European Council and the European Parliament before it can come into force.

Notably absent from public disclosure until now has been the question of how to classify crypto assets under MiCA law. Recently, fractionalized assets have attracted the attention of regulators because of their potential to be securities. Fractionalized assets are fungible tokens that together represent one NFT.

In the US, the debate is still ongoing, with Securities and Exchange Commission Chairman Gary Gensler claiming that the “vast majority” of cryptocurrencies are securities and fall under the jurisdiction of the SEC.

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