European Union regulators are working on new steps to set new laws for the cryptocurrency market while also protecting the interests of retail players. According to the most recent developments, European regulatory authorities are attempting to prohibit leveraged bets on digital assets by imposing limits on exchanges, investment funds, and so on.
The European Union’s watchdog said in a statement on Thursday, May 25, that it is striving to prevent shocks that may jeopardize financial stability elsewhere. The European Systemic Risk Board offered many proposals, including requiring all cryptocurrency firms to submit regular reports and instituting special rules for some of the space’s major players. The ESRB stated in its report, “Systemic risks could arise quickly and suddenly.”
As a result, they’ve proposed a few amendments to the recently implemented MiCA legislation, including “introducing leverage limits for investment funds exposed to crypto-assets.” Furthermore, the ESRB proposed limiting the crypto firm’s capacity to lend tokens to its clients, which has been a popular method of making high-leveraged bets. Furthermore, the ESRB requested that strict collateral requirements be imposed on distributed finance products including stablecoins.
European Union And Its MiCA Laws
This comes only ten days after the EU Council adopted the Markets in Crypto-Assets (MiCA) law. The EU member states and the European Parliament have jointly established MiCA rules that require crypto companies to seek EU licenses to serve clients within the bloc. Furthermore, these businesses must adhere to safeguards to avoid money laundering and terrorist financing. After a big shakeup in the crypto market and several high-profile crashes last year, the EU has finally issued MiCA guidelines. The ESRB’s recent recommendations are not legally enforceable but will serve to shape the EU’s future work on updated versions of its crypto assets regulation (MiCA).