9 Important European Cryptography Regulations to Pay Attention to Besides MiCA

9 European Cryptography Regulations Besides MiCA: 1. GDPR - Data protection regulation for EU member states, including data encryption requirements. 2. eIDAS Regulation - Framework for electronic identification and trust services, including electronic signatures, seals, time stamps, and certificates. 3. PSD2 - Directive aimed at increasing competition and innovation in the payment industry, requiring strong customer authentication for electronic payments, which may include cryptography. 4. NIS Directive - Cybersecurity requirements for operators of essential services and digital service providers, including encryption and incident reporting. 5. Cybersecurity Act - European cybersecurity certification framework, including certification schemes for ICT products, services, and processes, related to cryptography. 6. ePrivacy Regulation - Proposed regulation that sets out rules for the processing of personal data in the context of electronic communications, including requirements for encryption. 7. Regulation on the Free Flow of Non-Personal Data - Aimed at removing barriers to the free movement of non-personal data within the EU, including provisions on data security, including encryption. 8. DSA - Proposed regulation that aims to modernize the regulation of digital services in the EU, including requirements for end-to-end encryption in certain circumstances. 9. NIS Directive II - Proposed directive that includes new requirements on cybersecurity, including encryption and incident reporting.

Compilation | Wu Shuo Blockchain

Original | DL News

Reference Reading: Explaining the EU MiCA Act in detail: becoming a “model law” for global encryption supervision

● The European Council has approved the long-awaited MiCA (Markets in Crypto-Assets) regulations, which is the last step to becoming a formal law.

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● Other laws that may be passed in the EU include cryptocurrency tax reporting standards, anti-money laundering rules, seeking to issue digital euros and smart contract regulations, etc.

The EU’s important cryptocurrency rulebook has just passed its final legislative hurdle. Representatives of member states of the European Council unanimously voted to approve rules for the crypto asset market. These rules, known as MiCA, are expected to come into effect in June, and the new law will involve consumer protection, market integrity, and financial stability. Elisabeth Svantesson, Sweden’s Minister of Finance, representing the current Swedish Council Presidency, said that these regulations will “better protect Europeans who invest in these assets and prevent the cryptocurrency industry from being used for money laundering and funding terrorism.”

Companies offering crypto services in the EU will have legal certainty, and MiCA allows them to “transfer” their licenses from one member state to other countries in the group of 27 countries. Stablecoin issuers will need to meet capital and reserve requirements and face restrictions on stablecoins priced in non-euro. Regulations on stablecoins will take effect in mid-2024, and others will take effect in early 2025. Before that, European regulators need to draft technical rules on how to implement the legislation.

EU policymakers are working to end the “wild west” of cryptocurrencies and develop regulatory blueprints for other jurisdictions. While MiCA is hailed as the first major, comprehensive regulation of crypto assets, it is far from the only regulatory rule affecting the industry. Here are nine additional rules that will shape the European crypto industry.

Cryptocurrency travel rules

The revised Funds Transfer Regulation (TFR) requires identification details to be attached to both the sender and receiver of cryptocurrency transactions. This requirement is expected to be implemented at the same time as MiCA. The TFR was approved by the European Council on Tuesday.

Svantesson said, “Today’s decision is bad news for those who use crypto-assets for illegal activities, to bypass EU sanctions, or to fund terrorism and war.” This policy is consistent with the Financial Action Task Force’s (global anti-money laundering supervisory body) recommendations on crypto assets and anti-money laundering.

It is notable that transfers to self-hosted wallets that are not third-party providers will need to include identification information for transfers worth over 1,000 euros (approximately $1,090). Purely peer-to-peer transactions from self-hosted wallets will not be subject to the regulation.

Anti-Money Laundering Rules

The EU’s Anti-Money Laundering (AML) regulations have listed decentralized finance (DeFi), NFT platforms, and DAOs as obligated entities. MiCA excludes these from its scope — triggering discussions among EU officials about MiCA II — so AML legislation fills in these gaps.

One major point of discussion for the crypto industry is restrictions set on commercial payments involving self-hosted wallets worth over 1,000 euros (approximately $1,090). Blockchain advocates suggest policymakers align with measures outlined in the TFR.

Other provisions of the bill include banning privacy coins such as Monero or Dash, as well as anonymous accounts. Negotiations are expected to conclude in the summer.

Smart Contract Regulation

Currently being negotiated among European institutions, the Data Act includes a provision for regulating smart contracts used for data sharing. The provisions include adding an emergency stop switch to smart contracts.

While the regulation is designed to cover smart devices and the Internet of Things, some in the industry are concerned that the scope of the regulation is not clearly defined and cannot rule out blockchain-based DeFi smart contracts.

Marina Markezic, Executive Director of the European Crypto Initiative, previously told DL News that the Data Act could render public blockchains unusable under such requirements. As they enter the final stages of negotiations (expected to end in June), the industry association has made suggestions for modifications to policymakers.

Network Security Law

The Digital Operations Resilience Act (DORA) sets standards for the cybersecurity and data protection of companies in the financial sector, such as credit institutions, investment companies, and crypto service providers. The new law will take effect from January 2025, requiring companies to establish a robust ICT risk management framework, report relevant incidents to authorities, and regularly test their digital operations.

“DORA is actually the cornerstone of our work on digital finance in the European Union,” said European Commissioner for Financial Services Mairead McGuinness to lawmakers in November. “Financial institutions are increasingly reliant on technology. More and more people and businesses are managing their finances online. Therefore, protecting the financial system from cyberattacks and cyber fraud is critical.”

Tax Reporting

The eighth edition of the Administrative Cooperation Directive (DAC8) requires tax reporting from crypto asset service providers. According to a European Parliament briefing, a crypto reporting framework could add up to €2.4 billion annually to the EU’s tax revenue.

Starting from 2026, companies providing crypto services will need to report their customers’ domestic and cross-border transactions to national authorities. This may include non-fungible tokens (NFTs) and central bank digital currencies.

This is the first time that mortgages and loans have been included in the definition of crypto activities in EU legislation, which has faced industry opposition. As this is a directive rather than a regulation, EU member states will have more flexibility in how the rules are implemented.

For all tax-related policies, the European Council, which directly represents member states, will be responsible for decision-making. The Council published a text version on Monday, waiting for the selective negotiations of the European Parliament before passing the text.

Tokenization Market Sandbox

The DLT (Distributed Ledger Technology) Pilot Regime is a regulatory sandbox that allows traditional financial players and new market entrants to experiment with tokenized financial instruments and innovative markets based on decentralized technology. The project will begin in March 2023 and last for three years.

The European Securities and Markets Authority will act as a regulator in the pilot and will write a report on its findings in March 2026. Once submitted, the European Commission is expected to propose legislation.

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