Several big players in the crypto markets have struggled and further declines could force other crypto investors to sell portfolios to meet margins to trade at brokerages and cover losses.
Ether, the currency linked to the “blockchain” (chain of blocks) ethereum, it fell 7.5% to $1,016.08 on Thursday, down $82.38 from its previous close.
Both digital assets have taken a hit since US lender Celsius Network said this month it would suspend withdrawals.
Bitcoin and Ethereum were hit even harder by the apparent insolvency of cryptocurrency hedge fund Three Arrows Capital, which a person familiar with the matter told Reuters had gone into liquidation.
Many of the recent problems in the sector can be traced back to the spectacular collapse of the so-called TerraUSD stablecoin in May, which lost almost all of its value.
The European Union agreed to regulations for cryptocurrencies
Crypto firms will need a license and customer guarantees to issue and sell digital tokens in the European Union, under groundbreaking new rules agreed by the bloc to rein in the volatile “Wild West” market.
Globally, crypto assets are largely unregulated and EU national operators are only required to show controls to combat money laundering.
Representatives of the European Parliament and EU states reached an agreement late on Thursday on the Markets in Crypto Assets Act (MiCA).
“Today we bring order to the wild west of crypto assets and set clear rules for a harmonized market,” said Stefan Berger, a center-right lawmaker who led the negotiations on behalf of Parliament.
“The recent drop in value of digital currencies shows us how highly risky and speculative they are and that action is critical,” Berger said.
Cryptocurrency markets have slumped this year, pressured by the collapse of the stablecoin terraUSD and the fact that major US crypto lender Celsius Network has frozen withdrawals and transfers.
Bitcoin, the world’s largest token, has plunged 70% from its record high of $69,000 in November, dragging down the broader market.
CONSUMER PROTECTION
The historical regulation confirms the role of the EU as a regulatory body in digital matters, according to the EU States.
“Under the new rules, crypto asset service providers will have to adhere to strict requirements to protect consumers’ wallets and be held accountable in case they lose investors’ crypto assets,” they added.
The agreement will need the approval of the European Parliament and the EU states to become law, followed by an application period.
The new law gives crypto-asset issuers and related service providers a “passport” to serve customers across the EU from a single base.
Holders of “stablecoins”, a type of cryptocurrency designed to maintain a stable value, will be able to claim at any time and free of charge from the issuer and all “stablecoins” will be supervised by the bloc’s banking watchdog, the European Banking Authority. .
Robert Kopitsch, secretary general of the Blockchain for Europe lobby group, which includes major players Binance and Crypto.com, said the rules were “various in character.”
“Thanks to the last minute changes, we also fear that stablecoins have basically no way to be profitable,” Kopitsch said.
The Association for Financial Markets in Europe (AFME) said the rules would provide security, reduce fragmentation and underpin the development of a strong and well-functioning market.
However, more clarity is needed to ensure that custodians of crypto assets are only liable for negligence or misconduct and not for events beyond the custodian’s control, such as a nation-backed hack, AFME said.
NFT COMMITMENT
Many states, such as Ireland, Lithuania, and Greece, have long opposed the inclusion of non-fungible tokens (NFTs), which are digital assets that represent objects from art to videos.
But under pressure from EU lawmakers, the compromise reached on Thursday night provides for “NFTs to be excluded from the scope, except if they fall under existing crypto asset categories.”
Brussels will assess within 18 months whether separate rules for NFTs are necessary.
National regulators will be responsible for licensing crypto firms, but will have to keep the European Securities and Markets Authority (ESMA), the EU’s securities watchdog, informed about large operators.
ESMA will develop rules for cryptocurrency companies to disclose information about their environmental and climate footprint.
The United States and the United Kingdom, two major cryptocurrency hubs, have yet to pass similar regulations.
The company behind major stablecoin USD Coin called the regulations “a significant milestone.”
“Although no set of rules is perfect, … it provides practical solutions to issues that other jurisdictions are beginning to address,” US company Circle said in a blog post.
Source: Ambito
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