by Policy analysts have revealed that the proposed European Union (EU) crypto legislation intends to prohibit scenarios like the FTX crash. EU legislators would be prompted to revise the proposed law by imputing severe measures against crypto-associated risks. The lawmakers will adequately scrutinize the proposed crypto law before it is endorsed.
The EU regulators and analysts have expressed their thoughts in response to Binance proposed takeover of the FTX exchange. They outlined that the upcoming crypto asset regulation will prohibit future market crashes in the region. The Markets in Crypto-Assets Act (MiCA) legislation was formulated to regulate the volatility of the crypto markets.
Reactions of Policy Analysts to FTX Crash
Amidst the current bearish market, FTX CEO Sam Bankman-Fried announced the winding up of the FTX platform. His decision to sell the platform to Binance astonished numerous actors in the crypto community. The aftermath of the FTX crash was a general downtrend of all cryptocurrencies.
Stefano Berger, who was a significant mediator of MiCA, stated that “The crypto industry is not a casino. Therefore the MICA, which is expected to undergo parliamentary endorsement, would be reviewed.” EU’s legislation is the defense against Lehman Brothers events, just like the FTX scenario, The Block reported.
He further emphasized that the EU’s legislation has outlined measures to separate client and investment assets. Also, the act will provide internal control systems, which will aid transparency in the crypto industry. Like other financial institutions, crypto exchanges and service providers need systems that guarantee risk management.
How EU’s MiCA Would Curb Events like FTX Crash in the Future
EU’s crypto regulation adviser Dimitris Psarraki revealed that the FTX event would equip the regulatory bodies to perform better. With new proposed regulations slated to take effect in 2024, the EU is set to regulate the crypto industry. The Union has tasked the European Securities and Markets Authority (ESMA) to formulate regulations for the crypto industry. Financial institutions will also partake in implementing the MICA legislation for practical usage.
The EU’s legislation establishes regulatory norms for crypto platforms and other suppliers of services related to digital funds. MICA’s chapter V outlined the need to endorse crypto platforms before permitting their regional operation. Also, the chapter enumerated procedures for crypto platforms in terms of terminating business operations.
Pssrrakis announced that EU lawmakers would review MICA’s chapter V because of the FTX crash. Adequate measures will be put in place to ensure investor’s fund protection before the lawmakers will endorse the legislation.
