The German politician explains why certain forces in the European Parliament have abruptly endorsed a Bitcoin ban.
The Economic and Monetary Affairs Committee of the European Parliament recently approved a draught of its comprehensive Markets in Crypto Assets, or MiCA, crypto regulation package. The new framework addresses a broad range of cryptocurrency-related issues, including the legal status of all major currencies and stablecoins, as well as the regulation of cryptocurrency mining and exchange platforms.
Stefan Berger, a member of the Christian Democratic Union (CDU), has been appointed as the Parliament’s rapporteur for the upcoming MiCA regulation — the official charged with reporting on the bill’s proceedings. During the subsequent negotiations, the German politician was adamantly opposed to a ban on proof-of-work (PoW) assets such as Bitcoin (BTC).
“Audits of one’s own assets are already underway.”
Berger noted that the European Commission’s initial proposal to implement MiCA in September 2020 came at the right time. “We are on the cusp of this technological development, and regulation has highlighted several areas that urgently require regulation,” he explained. MiCA was intended to be a “pure forward-thinking financial market regulation” that would be “technologically agnostic.”
Although there was initial agreement in Parliament on MiCA’s key points, shortly before the vote, the Left, Greens, and Social Democrats abruptly opposed the regulation on environmental grounds. According to Berger, the discussion focused on sustainability and whether the European Union should prohibit consensus mechanisms such as PoW that do not appear to meet certain sustainability criteria.
Finally, Berger proposed his own solution: tying crypto assets to the EU taxonomy, which is already used to assess the sustainability of financial investments and funds. “If the commission evaluates equity funds, it can also evaluate crypto assets or stablecoins,” Berger explained. “After that, everyone is free to decide whether or not to continue. The rethinking of financial products and the examination of one’s own assets are already underway.”
The prohibition of PoW is ruled out.
MiCA is currently undergoing trilogue negotiations between the European Commission, Council of Ministers, and European Parliament. The proof-of-work prohibition is off the table, and Berger hopes that the EU institutions will come up with a “simple” taxonomy solution. As he stated:
“I believe that in the end, we will reach a satisfactory conclusion and that the discussion will not move in the direction of reintroducing proof-of-work prohibitions, but in the opposite direction.”
MiCA is expected to take effect between mid- and late-2023. The framework leaves financial supervisory authorities in member states with relatively little leeway, as they are required to cooperate with European bodies such as the European Banking Authority and the European Securities and Markets Authority. Berger observed that MiCA receives widespread support from the European crypto community:
“Many member states are interested in having a regulatory framework that promotes growth and allows for development. We are the first continent to have such a regulation, and as a result, many countries are considering it.”
“Yes, regulations are necessary.”
Although anti-money laundering provisions were omitted from the latest MiCA draught, the European Commission has prepared a separate package, the Transfer of Funds Regulation, to address the issue. This framework establishes stricter disclosure requirements for parties to cryptocurrency transactions. Berger supports this AML regulation in principle; however, he opposes the section that addresses so-called “unhosted” wallets — cryptocurrency accounts that are not managed by a custodian or centralised exchange. According to Berger:
“If I pay a supermarket with 100 euros in cash, I am not required to show my ID card or identify myself. I simply make a cash payment, and that is it. And why should the crypto sector be any different? That I do not comprehend. Germany is a cash-based society, and we continue to accept an EU-wide cash payment cap of 10,000 euros. Why would we not create the same rules of the game for crypto if we already have them? There are two worlds: the normal world and the crypto world. Yes, regulations are necessary, but you must also allow for breathing room.”
“Cryptocurrencies are not always malicious”
The final decision on the TFR will be contingent on the outcome of other trilogue negotiations, for which Berger is not the rapporteur. Berger stated that neither the council nor the commission proposed the section on “unhosted” wallets. As with the proposed PoW ban, the initiative originated on the Left, with the Social Democrats and the Greens.
According to Berger, the negotiations could still result in the abolition of the crypto-hostile TFR language. He also hopes that German Finance Minister Christian Lindner, a Liberal, will work to amend the current draught. That, however, may prove difficult: the council’s majority is socialist, and Lindner himself is a member of a German coalition of Social Democrats and Greens.
“Many centrists do not want decentralised systems in the first place. In essence, we also have a right-left split in the European Parliament on this subject. However, I remain hopeful that the commission and the Council of Ministers will view it differently.”
Berger noted that understanding how Bitcoin, stablecoins, and other digital assets work takes time, and many members of the European Parliament are still learning.
Will their comprehension improve? Yes, Berger stated, as blockchain technology continues to gain traction. Even the harshest critics should recognise that “cryptos are not always evil” — after all, over $130 million in cryptocurrency donations went to aid Ukrainians during the country’s conflict with Russia. “And that is why I am also working with MiCA to lay the groundwork for a slightly altered world.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.