European Union (EU) lawmakers have voted in favour of the Markets in Crypto-Assets (MiCA) regulation, making Europe the first major jurisdiction to introduce a comprehensive law to regulate the emerging digital assets industry. On Thursday, the European Parliament overwhelmingly supported the passage of the law, with 517 votes against 38 (and 18 abstentions).

Parliament Clears Path for MiCA in 2024

MiCA, which was first opened for discussion in September 2020, seeks to protect European consumers, enshrine environmental sustainability and prevent money laundering in the crypto industry. The regulation now awaits final approval from the Council of the European Union.

The favorable vote to pass the crypto rules comes after a debate on Wednesday during which lawmakers signaled majority support for the law. MiCA, which is expected to go live sometime in 2024, requires digital asset exchanges and crypto wallet providers to obtain a license to operate within any country in the region. The regulation also demands that stablecoin issuers hold sufficient reserves.

The Council of the European Union and the European Parliament, the two legislative bodies of the EU, reached provisional agreements for the rules in June last year. In recent months, the EU twice postponed the vote on the much-awaited crypto rules due to technical delays in translating the regulation into the 24 languages of the political bloc.

Speaking on the vote, Stefan Berger, the EU lawmaker who led negotiations on the rules, believes that the regulation puts “the EU at the forefront of the token economy." The lawmaker noted that the crypto industry in Europe now has "regulatory clarity that does not exist in countries like the US.”

“Consumers will be protected against deception and fraud, and the sector that was damaged by the FTX collapse can regain trust,” Berger said, according to an EU statement.

MiCA Is “A World First”

Reacting to the favorable vote, Mairead McGuiness, the EU Commissioner for Financial Services, Financial Stability and Capital Markets Union, described the regulation as “a world first.” “The rules will start applying from next year. We’re protecting consumers and safeguarding financial stability and market integrity,” McGuiness wrote on Twitter.

Also reacting, the European Securities and Markets Authority (ESMA), noted it is now tasked with developing the guidelines for implementing MiCA ahead of its 2024 enforcement. The EU securities regulator also warned that while the legislation is "a significant step towards robust protection for investors," crypto remains "a risky endeavor with limited safeguards at this stage.”

EU Endorses Separate Law to Monitor Transfer of Crypto

Meanwhile, on Thursday, lawmakers also voted resoundingly in favour of a separate law known as the Transfer of Funds Regulation (TFR). The regulation requires digital asset operators to identify their customers in order to prevent money laundering.

Earnest Urtasun, a Member of Parliament, explained that the Transfer of Funds Regulation will “close a major loophole” in Europe’s anti-money laundering framework. It will also implement the "most ambitious travel rule legislation in the world so far.”

“The Recast of the TFR will oblige crypto-asset service providers to detect and stop criminal crypto flows and also ensure that all categories of crypto companies are subject to the full set of anti-money laundering obligations,” Urtasun explained.

"MiCA Will Make Europe an Attractive Crypto Destination"

Meanwhile, Alisa DiCaprio, the Chief Economist at R3, an enterprise blockchain company, sees the move as Europe positioning itself as a leader in digital finance innovation. DiCaprio expects the development to motivate other top jurisdictions like the United Kingdom and the United States to speed up their race towards crypto regulation.

“Regulatory and legal certainty provide the core foundations for any emerging technology to be applied successfully,” DiCaprio told Finance Magnates, further noting that the EU making the first move to lay the foundations "will undoubtedly make Europe an attractive destination for more companies in the space to set up and invest in.”

Also commenting, Michael Thirer, the Legal, Governance and Regulatory Affairs Director at Muinmos, described the EU's move as "a bold choice" that will pave the way for many other regulators across the world. The move will also stabilize "an industry that is everything but stable."

"It will be interesting to see how this affects crypto service providers; and how it will carry forward to the 'next big thing' – like the Metaverse, for example – and the willingness of regulators to regulate financial transactions committed purely in it," Thirer also told Finance Magnates.

"This is great news," said Founder and CEO of GCEX, Lars Holst. "We are 100% in favour of regulation and embrace it more than anything here at GCEX. MiCA creates a framework for all serious players and will protect the market. It will make it even clearer for clients who they can trust and who they should deal with."

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