• France warns that NFT issuers may be required to centralize and register under the EU’s MiCA rules

  • According to a paper, new European Union rules could oblige issuers of non-fungible tokens (NFTs) to consolidate and register, a move that insiders fear could “substantially widen” planned EU crypto rules.

    The measures, which are nearing completion, might also tighten the regulations for foreign exchanges entering the EU and keep a closer eye on the energy consumption of crypto mining, even if the threat of a bitcoin ban appears to have passed.

    The document was created by France, whose government is in charge of presiding over discussions in the EU’s council. It is not dated, but it was created in advance of a closed-door meeting scheduled for Friday early European time. Before the Markets in Crypto Assets Regulation, or MiCA, can become legislation, governments and politicians must work out their differences.

    While governments want NFTs to be completely exempt from the new law, the European Parliament is concerned about their use in money-laundering schemes and wants stricter regulations.

    According to the document, this would imply that “an NFT issuer would have to be a legal person” rather than a decentralized company, as well as register with the authorities and adhere to other consumer-protection procedures outlined in the law.

    According to the document, “this would dramatically widen the scope of the MiCA law” beyond its current focus on cryptocurrencies and into NFT assets from the worlds of art, entertainment, and gaming.

    Lawmakers look to have the support of the European Commission, which is in charge of mediating the remaining discussions — and which is also concerned about the integrity of the NFT sector, where scams and fraud are on the rise.

    The council also appears to be willing to give in to lawmakers’ harsh stance on regulating crypto mining’s energy emissions. The European Parliament no longer supports restrictions on proof-of-work validation technology, which some have suggested could amount to a bitcoin (BTC) ban, but instead wants new coins to include information about their environmental impact in regulatory documentation.

    According to the letter, France “would recommend supporting” the parliament’s call as long as it is neutral in arbitrating between alternative technologies, such as proof-of-work. The EU’s financial-services commissioner, Mairead McGuinness, stated on Sunday that a new global crypto accord should consider environmental implications.

    DeFi

    It could be good news for decentralized finance (DeFi). The European Parliament had controversially proposed including decentralized autonomous organizations (DAOs) inside the scope of the law, taking it into the territory it was never designed to cover, and creating problems about who would be responsible for communicating with regulators.

    Lawmakers have now “indicated flexibility” to the softer posture preferred by governments, who only want a follow-up report on Web 3 advances in one or two years.

    Governments may also take a stronger stance against crypto sites from outside the EU attempting to market to EU clientele, according to the memo.

    Under conventional finance law, foreign enterprises can still offer investment services like as brokerage to any European who approaches them and asks — but the restrictions, known as a reverse solicitation, are relatively ambiguous and inconsistently administered.

    The crypto sector has stated in the document that “inadequate regulation of reverse solicitation could lead to decreasing the applicability of the MiCA law and creating the path for unfair competition.” It advises that governments reconsider how to avoid any gaps or divergences.

    The announcement comes only days after Binance announced that it had received regulatory approval in France, implying that it may be able to sell across the EU if MiCA is approved.

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