IAS EDITORIAL ANALYSIS - A Turning Point in Crypto Regulation, led by Europe

A Turning Point in Crypto Regulation, led by Europe


For Mains

The Advantages of Crypto Currency
  • Crypto is an Internet-native asset not limited by geographical boundaries.
  • To transfer crypto, one does not need a pipeline or shipping container.
  • Crypto assets are not issued or controlled by any enterprise hence are market determined which allows for higher transparency.

The concerns about crypto currency

  • Regulating crypto currency is not easy.
  • Monitoring the flow of capital to and from a country becomes a major point of concern.
  • Usage/Misuse of crypto currencies by organised crime groups and even terrorist organisations are a major concern.

What is the Regulation of Markets in Crypto-Assets, or MiCA?

  • The European Commission’s Regulation of Markets in Crypto-assets (MiCA) proposal is a regulatory framework developed since 2018 to help regulate currently out-of-scope crypto-assets and their service providers in the EU and provide a single licensing regime across all member states by 2024.
  • MiCA aims to “harmonise the European framework for the issuance and trading of various types of crypto token as part of Europe’s Digital Finance Strategy”
  • It proposes to regulate crypto asset services and crypto asset issuers.
  • By regulating these entities, Europe intends to provide consumer protection, transparency, and governance standards, regardless of the decentralised nature of the technology.
  • Then, MiCA goes further to put forth specific regulations for stablecoins, rightly demarcating them from other crypto assets.
  • Under MiCA, stablecoin issuers must maintain reserves to cover all claims of the coins, and should implement a process for immediate redemption if and when holders seek one.


What are Stablecoins?
  • Stablecoins are cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity or financial instrument.
  • Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies.
  • Stablecoins pursue price stability by maintaining reserve assets as collateral or through algorithmic formulas that are supposed to control supply.
  • India can use the European regulation as a model and adapt a suitable legislation to regulate the crypto market in the country.

Source The Hindu

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