EU Study Recommends Treating All Crypto Assets as Securities by Default and Granting Legal Status to DeFi Organizations.
Lawmakers at the European Parliament have commissioned a study suggesting that all crypto assets should be considered as securities by default. The study also recommends granting legal recognition to decentralized finance (DeFi) organizations. This marks a significant advancement in the regulation of crypto assets.
The report was published while the European Union is finalizing its regulation called Markets in Crypto Assets (MiCA). The EU is also discussing the need for additional regulations to cover aspects like DeFi, staking, and NFTs.
The report suggests that all crypto assets should be categorized as transferable securities. This means they would be subject to the strict rules and regulations that the EU applies to conventional stocks and bonds, unless a national regulator states otherwise.
The proposed default rule by the academic panel could be a game-changer as it transfers the responsibility of determining regulations and technical aspects from regulators to the industry. This shift has the potential to bring significant changes to the way things are currently done.
The panel raised concerns about the effectiveness of MiCA in the near term, specifically noting the difficulties of enforcing its rules in a complex, cross-border environment. It’s important to mention that the study’s findings, although informative, do not represent an official stance of the European Parliament.
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The crypto industry has faced ongoing uncertainty regarding whether traditional financial securities regulations apply to digital assets. This situation is also observed in the United States, where Securities and Exchange Commission Chief Gary Gensler has refrained from providing a clear stance on whether prominent cryptocurrencies like ethereum (ETH) are classified as securities within his jurisdiction.
After MiCA was put into effect on Wednesday, EU agencies responsible for overseeing banking and securities markets now have the responsibility of developing the specific rules required for its implementation.
Even before the implementation of MiCA, the European Systemic Risk Board, a panel in the EU responsible for monitoring financial stability risks, suggested the need for additional legislation to address any gaps that MiCA might not cover. Interestingly, the study also highlighted the unregulated and risky nature of decentralized autonomous organizations (DAOs), referring to it as the “Wild West.”
In the UK, experts have been examining the legal status of DAOs, which could indicate upcoming regulations aimed at curbing fraudulent activities within this sector, as described in the report.
Despite the associated risks, the general consensus is leaning towards increased supervision and clear regulations in the continuously evolving world of crypto assets.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
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