In mid-April, the European Parliament adopted a set of rules called the Market in Crypto-Asset Regulation (Micar) for crypto-issuing companies, investment advisors and exchanges trading crypto-currencies. The new rules significantly tighten control over the activities of cryptocurrency traders.
What are the reasons for introducing the new rules?
There are many cases of fraud and dishonest treatment of investors and their money in the cryptocurrency market. The most notorious scandal was the collapse of the American cryptocurrency platform FTX in 2022. Then the platform, whose capital was estimated at more than $33 billion, went bankrupt in just 3 days. The exact amount of damage has not yet been clarified, but it is clear that investors have lost tens of billions of dollars of their investments.
Buying a cryptocurrency is an extremely risky investment, as the Dutch supervisory authority De Nederlandsche Bank (DNB) never tires of warning about. The value of cryptocurrencies is subject to fluctuations, which can be catastrophic for investors. Investing in such assets can even bankrupt banks. For example, the value of bitcoin ranged from tenths of a US cent to $64 at its peak. Bitcoin is currently worth around $799.
At the same time, buyers of cryptocurrencies do not have any bank guarantees. For example, deposits up to 100 euros in the event of a bank failure are protected, and in the event of a collapse of cryptocurrency issuing companies or exchanges / platforms for its sale, the investor is not protected.
Some popular cryptocurrency trading "gurus" shamelessly rip off their followers by recommending strategies they don't use themselves. For example, they recommend buying or selling cryptocurrencies, while they themselves act the other way around and make fortunes on this.
Cryptocurrencies are widely used in criminal activities: laundering "dirty" money, financing terrorism, trading in goods prohibited for sale, etc. Platforms that trade and store cryptocurrencies usually do not have any collateral (real estate, gold, real money) that could compensate investors for losses.
Nevertheless, the popularity of cryptocurrencies, and there are about 22 of them currently traded, is at a high level and continues to grow. More than two million Dutch people already own cryptocurrencies, their average investment is 930 euros, which corresponds to 1180 euros for each resident of the Netherlands.
In an effort to protect the rights of investors in cryptocurrencies and save the economy from shocks associated with major bankruptcies, the European Parliament adopted the Micar set of rules.
What changes does Micar introduce?
From 2024, cryptocurrency platforms can be fined or have their licenses revoked. This will solve the problem that exists now - formally, such platforms are required to be registered with the DNB, but many of them operate from foreign offshore zones and so far have the opportunity to avoid liability for illegal or dishonest activities. From 2024, regardless of the location of a cryptocurrency company, it is required to have a license. As a result, violations will have to pay fines or leave the market due to deprivation of the right to work.
Besides:
- Companies operating in the field of cryptocurrencies will be required to clearly list all risks and especially costs in advance in an official document for buyers of cryptocurrencies. If the company hides something, its client will have the opportunity to go to court.
- All client money must remain in a separate account, which will protect the interests of the client in the event of bankruptcy of the cryptocurrency platform.
- Platforms will be required to hold around 30% of the value of the cryptocurrency in euros, in case customers want to exchange cryptocurrencies.
- A “return obligation” is introduced: sellers will be required to buy back cryptocurrencies previously sold to the client, if he deems it necessary.
- The buyer will have the right to withdraw from the transaction within 14 days. This rule complies with the trading requirements of any online stores.
- There will be heavy fines for market manipulation. Well-known financiers will not be able to enrich themselves with impunity on fluctuations in the rate of cryptocurrencies caused by their statements.
Is Micar a panacea for all diseases of the crypto market?
Cryptocurrency is a relatively new phenomenon in the financial markets. According to analysts, further changes in the rules will be required. However, everyone agrees that Micar is an important improvement that sets the rules for working in the cryptocurrency market.
Pay attention! Owning cryptocurrencies can lead to an obligation to pay taxes. In order not to make mistakes when filling out a tax return, order the service of its submission from our specialists.
Publication Date: 16.05.2023
