MEPs debate the first EU rules to ensure the traceability of crypto-asset transfers, to prevent money laundering, terrorist financing, and other crimes. Opening statements by Stefan BERGER (EPP, DE); Ernest URTASUN (Greens/EFA, ES) and Assita KANKO (ECR, BE), Rapporteurs and by Mairead MCGUINNESS, European Commissioner for Financial Services. This transcription is a result of an automatic process. Please check against delivery.

statement

Strasbourg

debate

plenary session

fight against cyber attacks (T)

McGUINNESS, Mairead (EPP, IE)

URTASUN, Ernest (Greens/EFA, ES)

KANKO, Assita (ECR, BE)

BERGER, Stefan (EPP, DE)

Joint debate - Crypto-assets: opening statements by Stefan BERGER (EPP, DE); Ernest URTASUN (Greens/EFA, ES) and Assita KANKO (ECR, BE), Rapporteurs and by Mairead MCGUINNESS, European Commissioner for Financial Services

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, Thank you very much, Madam President. Ladies and gentlemen, colleagues. With the vote on the crypto regulation, we come to the end of a very long and complex process. Tomorrow's vote is a joint success. A success. Colleagues that we have fought for a long period of time. The final vote on the Korea CRYPTOASSETS regulation means that the European Union will be at the forefront of the token economy.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, The Legal situation for Crypto where rules that did not really protect consumers against deception and fraud. Now that situation will be transformed. We've seen the FTC's case with €30 billion was simply went up in smoke and could have caused a Lehman Brothers situation. Thank goodness there was just enough regulation to prevent that. The Mica Initiative, the markets and crypto assets should restore the trust that was damaged by the FDX case.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, And let's hope that we can bring stability to this new sector. As we've conceived this. We are going to ensure that consumers have the necessary information that they need. So a white paper will be needed so that the underlying technological risks. So exchange and compensation rights will have to be regulated. New coins will have to be monitored to ensure that there is no currency instability involved.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, Facebook with its 5 billion users would never have got authorisation for its planned Libra product. Nonfungible tokens are exempted from Mica. Mica only covers the crypto asset service providers that provide NFT. That's a good solution. We also have a competent supervisory authority involving ESMA and EBA, and I think that we found the right solution. Finally. The environmental impact has been taken into account.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, This was a very controversial issue in a negotiating team. We found a good solution. So that we did not have to put a ban on proof of work. But the issue is have to disclose environmental impact and energy use. And I think on the basis of this data, everybody should be able to decide whether they wish to buy a cryptoasset or not.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, Ladies and gentlemen. Tokenization is an ongoing process. Blockchain technology is opening the way to fantastic new technologies. I'd like to thank all of the shadow rapporteurs for the very high level of the debate that we had within our group.

SOUNDBITE (German), Stefan BERGER (EPP, DE), Rapporteur, We dared to venture into terrain that politicians have not been on before. And I'd like to thank the Commission for the excellent cooperation in this very complex debate. And tomorrow, I am hoping for broad support for the solution. Thank you.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, Dear President, Commissioner, the MiCA and TFR request mark the end of Wild West era for the unregulated world of crypto assets. For over a decade, the lack of regulation has resulted in massive losses to many first time investors and provided a safe haven for fraudsters and international criminal networks. MICA represents an important and necessary first step to bring the crypto sector under the regulatory oversight.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, There will be safeguards for investor protection, rules against market abuse, anti-money laundering checks on companies and crypto companies will be held liable to their clients. One key concern was that this whole new framework is undermined by foreign companies serving EU customers from outside the EU in breach of MICA standards.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, We successfully push for a EU wide blacklist of non-compliant entities supported by far reaching supervisory powers. These will add regulatory teeth to MICA. A contentious point was related to the climate impact of crypto mining. MiCA will require now issuers and crypto companies to disclose information on the climate footprint of the crypto they issued and trade based on a standardised methodology.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, This is positive, but I have to say it is only a first step until we finally manage to better control at international level certain consensus mechanisms that are extremely energy intensive and have become a threat for our climate goals. Overall, there is more to be done, from lending and staking, decentralised finance, NFTs, to the environmental impact of crypto mining, as well as on antitrust and with respect to supervision of crypto groups.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, The recent collapses in crypto space, FTX, SVB, Silvergate, showed the urgency of taking additional steps, MiCA today is a first step but is not enough. Finally, MiCA will fully apply only in the last quarter of 2024 and I would like to ask the Commission that until then and also the Member States to analyse possible transitional measures to protect consumer and prevent abuses.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, Let me now quickly move to the request of the TFR. Today, illicit flows are moved swiftly across the world with a high chance of never being detected. Criminals thrive where there is financial secrecy and anonimity. The request of the TFR will finally oblige crypto asset service providers to trace every crypto asset transfer to a verified identity in order to detect and block suspicious transactions and facilitate investigations.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, The Parliament has significantly strengthened the original Commission proposal, firstly, by ensuring traceability on all crypto transfers from the first euro by eliminating the de minimis threshold of €1,000. Secondly, transfers between a CASP and a self-hosted wallet are captured by the traceability rules.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, And thirdly, CASP are required to apply enhanced due diligence on a risk basis to all transfers with self-hosted wallets, including verification, where possible, and mandatory verification in certain cases. I believe that with these measures, the EU will implement the most ambitious travel rule legislation in the world so far in full compliance with international standards.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, Let me end by thanking my co-rapporteurs and all shadows for the excellent cooperation to ensure a swift conclusion of political negotiations. Thank the Commissioner McGuinness, as well, and her teams for the support, to the French Presidency, also for the openness and constructive negotiations.

SOUNDBITE (English), Ernest URTASUN (Greens/ALE, ES), Rapporteur, And let me end by thanking my team, Cusseddu, Valeria and Jesús Hernández,  Green advisors with whom my work on this would not have been possible. Thank you so much.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, Dear Commissioner and dear colleagues. The last few years have been quite a wild ride in the crypto world. Sometimes, and my my colleagues would confirm that as well, it felt like a wild ride also here in this Parliament when we were negotiating the transfer of funds regulations.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, We started work on this file just after the total crypto market cap hit its third trillion. Trading was feverish, lobbying was feverish, and many people wanted to make sure that we do not harm this growth sector, which was also never our intention. Things look quite different right now. At one point, cryptos collectively lost almost two third of their market value.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, Although this year there has been some recovery, the sector is reeling from high profile scandals and bankruptcies. Some very normal people that could be your neighbours have lost a lot. A lot more people have come around to the idea now that crypto assets need normal regulations. That is what we have been working on in Parliament and Council together with the Commission.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, I am firmly convinced that the package we are now debating today is a good package. MiCA and TFR together will make holding and trading crypto assets safer for ordinary people and more difficult for criminals, terrorists and for sanction evaders. Let me highlight a few points.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, First of all, our new European legislation does not say that crypto assets are bad or that they are good. It does not say that holders and traders of crypto assets are bad or good. This legislation simply seeks to regulate a sector that is still quite new and dynamic, but it takes a neutral approach to the merits of the sector.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, Secondly, the rules that we agreed upon between Parliament and Council are not revolutionary. I would even say that they are a lot less revolutionary than some people believe crypto assets to be. 99% of our work has been to translate rules that have already existed for many years for the traditional banking sector to the crypto world. We have translated the existing travel rules from traditional finance to crypto.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, We have translated existing provisions on fighting money laundering and terrorist financing from traditional finance to crypto. Colleague Berger, with his file, created rules on transparency and disclosure, on consumer protection and the prevention of market abuse. All this stuff is standard as every entrepreneur and every EU country knows.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, Let me mention two specific issues from my own file. First of all, the threshold for application of the travel rule or the absence of a threshold. It was the Slovenian Council presidency that first removed the €1,000 threshold from the Commission proposal in Parliament. We followed the member states. I am convinced we are doing the right thing here. Colleagues, €1,000 threshold is really quite meaningless in the crypto world.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, There is high price volatility. Smurfing and opening or closing accounts is so easy. Just like banks, crypto asset service provider would anyway need to check linked transactions. So even with a threshold in place small amounts cannot be transferred without bureaucracy. Most importantly, it's often in the small amounts that crime are hidden. We have seen evidence of fundraisers from terrorists with amounts of around €100.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, We have seen evidence of payments on child pornography sites with amounts around ten or €20. If we would not include the small transfers, we will not be doing enough. Another contentious issue has been the partial inclusion of unhosted wallets. Again, the member states made the first move in their general approach.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, The point is the following. We already agree that crypto asset service providers, the banks and trading houses of crypto need regulation. We also concluded that peer to peer transfers, the decentralised part of the crypto world should stay out of the scope. Even if I understand that my S&D colleague Paul Tang disagrees.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, But what about the interaction between crypto wireless hosted by CASPs and unregulated private wallets. In order to prevent a massive loophole we decided to apply the travel rule to those interactions as well. This is not fundamentally different from identifying yourself when making cash deposits or withdrawals from your bank account.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, Will this create a dual system and push crypto holders and traders into the unregulated world? I do not think so. The verification burden on CASPs is very limited. We are not going to be as strict as some other countries are already today. Colleagues, there is more to say, but I think my time for now is up and I am looking forward to our debate.

SOUNDBITE (English), Assita KANKO (ECR, BE), Rapporteur, I will be happy to get back to you at the end after hearing your observation. And I also extend my thanks to my co-rapporteur Urtasun, whose is amazing, to all the shadows and to my political group advisor Jannes de Jong. Thank you very much. And the collaboration with Valeria.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Thank you, madam President. Dear colleagues, I welcome this debate and I think it's really important that we're having an exchange, before we have the vote tomorrow, because as some of you have mentioned, we are ahead of many other jurisdictions in this area.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, But I want to start by thanking the rapporteurs and to acknowledge the very good cooperation, despite disagreements to get these files over the line. Let me name Stefan Berger for MiCA Ernest Urtasun, and Assita Kanko for the transfer of funds regulation, and of course, all of the shadow rapporteurs for both files. And I really do want to extend an appreciation for our ECON chair, Irene Tinagli, who has facilitated this work, and of course, the French presidency.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, We are putting in place comprehensive, tailored rules for crypto assets in the European Union. No one, I think, in this House questions why these rules are absolutely vital for the financial system. And as we have seen in recent months, stringent rules and supervision are very much needed because we've had the collapse of projects such as FTX, Terra Luna, Celsius and Voyager.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, We've seen many retail investors lured in by false promises or false hopes, losing huge amounts of money. And while the crypto market may be too small to trigger systemic risks, we do know that there are increasing links between crypto markets and traditional financial services.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, So now to a few elements of our new rules. Firstly, MiCA will bring crypto markets into the regulated space by addressing risks related to consumer protection, market integrity and financial stability. It will also provide legal certainty for market participants that will be able to continue to innovate in a safe environment.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Secondly, it will introduce rules to prevent market abuse of crypto markets such as market manipulation. And we are bringing crypto asset service providers into the scope of anti-money laundering rules.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Third, under MiCA crypto asset service providers like wallet providers or exchanges that serve EU will customers have to be established in the EU and they will be authorised and supervised by national supervisory authorities. MiCA will allow EU authorised crypto asset service providers to passport their services throughout the European Union.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, In return, these operators will be subject to stringent prudential and conduct rules in addition to rules against insider trading and market manipulation. Crypto asset service providers will also have to disclose the environmental impact of crypto assets they offer to customers.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Fourth. The transfer of funds will require all crypto assets service providers recognised under MiCA to include information about the sender and beneficiary with crypto asset transfers. This is in full compliance with the Financial Action Task Force International Standards on crypto assets.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Overall, we are putting safeguards in place that would prevent companies active on the EU market from engaging in some of the practices that led certain crypto asset operators to collapse in recent months. After your vote tomorrow, we hope final Council approval and the final signature by the co-legislators will soon follow and we hope for publication by the end of June and entry into force in July of 2023. The new rules will apply progressively.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, The MICA provisions on STABLECOINS will start to apply in July of 2024. The provisions on issuers of other crypto assets and crypto assets service providers will start applying in January of 2025, together with the transfer of funds rules. We're applying these new rules rules rather progressively giving stakeholders time to adapt to them, and it gives us time to adopt the secondary legislation for the implementation of the rules.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, On a final note, and I think this is very clear to all of us, crypto markets are international and this means that robust rules in the EU are necessary, but other countries need to play their part as well. So I'm very supportive of international regulatory discussions in this area.

SOUNDBITE (English), Mairead MCGUINNESS, Commissioner, Financial Services, Financial Stability and Capital Markets Union, Indeed, in the U.S. just last week we did have useful conversations with our U.S. counterparts about the regulation of crypto markets. So thank you for this debate and I look forward now to listening to all of the contributions.