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In a recent statement, the European Central Bank (ECB), which is responsible for carrying out monetary policy and preserving price stability, outlined the required actions that must be made in order to harmonize crypto license requirements throughout Europe.

More precisely, in light of pan-EU licensing regulations that are expected to take effect by 2023, the central bank has established the groundwork for the standards it would take into account when regulating digital assets.

Bringing License Requirements into Harmony

The European Central Bank has indicated that it would take into account crypto businesses' business models, as well as their internal controls and evaluations, in a statement that particularly addresses instructions on the licensing of digital assets.

The ECB is taking these actions because, in the wake of the Markets in Crypto-Assets (MiCA) legislation's passing and the Basel Committee on Banking Supervision's publication of recommendations for banks' exposure to cryptocurrency, national frameworks regulating crypto assets "diverge fairly substantially."

The ECB has said that it would use the criteria from the Capital Requirements Directive, which has been in operation since 2013, to evaluate license requests for crypto-related activities and services in order to achieve standardisation.

In order to get the information required to evaluate possible risks, the European Central Bank will also depend on national anti-money laundering (AML) agencies and Financial Intelligence Units.

Widespread Regulatory Framework

The latest statement from the ECB comes as international authorities work to harmonize regulations for crypto service providers throughout the European Union.

In reality, lawmakers from the EU and European Parliament recently reached a historic agreement on laws that would govern crypto assets and service providers throughout the 27 members of the union. By forcing cryptocurrency issuers to maintain bank-style reserves for stablecoins, MiCA is the first significant regulatory framework for the cryptocurrency sector. Its goal is to safeguard customers.

Stablecoin issuers are required to amass a sufficiently liquid reserve with a 1/1 ratio in order to ensure an appropriate minimum liquidity under MiCA regulation, which will go into force by the end of 2023.

The bill comprises a legislative package that establishes conditions for cryptocurrency issuers to publish a white paper in order to register with authorities, as well as a limit on the daily transaction volume of stablecoins at 200 million euros. The European Banking Authority will also be responsible for monitoring stablecoins (EBA).

MiCA, which was first proposed by the European Commission in September 2020, is anticipated to harmonize the regulatory framework throughout the EU, preserve financial stability, and address environmental issues by requiring businesses to declare their energy use.

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