The European Union has launched a crackdown on crypto trading following the collapse of several major players in the scandal-hit industry, including Sam Bankman-Fried’s FTX.
Members of the European Parliament overwhelmingly backed the bloc’s first set of rules on Thursday to regulate the crypo sector, which has been described as a “wild west” market.
The new measures are designed to ensure that crypto assets can be traced, preventing money laundering, terrorist financing and other crimes. Major crypto providers will also have to disclose their energy consumption.
Cryptocurrency networks have been criticised for their high energy use, with bitcoin using almost as much energy each year as Malaysia according to Cambridge University.
The regulations will be introduced next year and will require companies that issue and trade crypto assets to be licensed by a national regulator.
Stefan Berger, a German MEP who steered the rules in the European Parliament, said: “This regulation brings a competitive advantage for the EU. The European crypto-asset industry has regulatory clarity that does not exist in countries like the US.”
The UK and US have yet to introduce their own regulatory frameworks for cryptocurrencies, with Rishi Sunak seeking to make a Britain a global crypto hub.
Romin Dabir, a partner at City law firm Reed Smith, said: “To date, the UK has adopted a wait and see approach to introducing crypto regulation. There was a fear that any regulation could be taken as an endorsement of the sector.
“Recent developments mean the UK’s historic approach is clearly no longer sustainable. Like the EU, Rishi Sunak wants to place the UK at the forefront of crypto innovation hence the Treasury consultation on proposals earlier this year.”
Earlier this week, multi-billion dollar crypto exchange Coinbase said it was considering a move to the UK as Joe Biden “punishes” fintech firms in the US.
On Thursday, it said it secured a licence to operate in Bermuda, as part of a wider push to expand globally.
