On Thursday, the European Parliament approved the world’s first comprehensive rules governing the “Wild West” cryptocurrency world, hoping to protect investors from abuse and manipulation. EU member states have already passed legislation covering cryptocurrencies, including cryptocurrencies, Bitcoin and Ethereum, as well as other trading tokens whose value is protected by blockchain technology such as NFTs.

The rules, now approved by the vast majority of European lawmakers, hope to shake up an industry plagued by scandal and failure.

One of the most recent failures for the cryptocurrency exchange occurred in November when the FTX platform and its subsidiary Alameda Research went bankrupt, eliminating its once-$32 billion market cap virtual trading business.

EU Financial Services Commissioner Mairead McGuinness said during a parliamentary debate Wednesday that the rules would regulate FTX and prevent it from collapsing, possibly causing heavy losses to some investors. Under the regulation known as Crypto Asset Markets (MiCA), Crypto Asset Service Providers (CASPs) must protect customers’ digital wallets and will be liable if investors lose their crypto assets.

“For example, we believe that if FTX comes under EU jurisdiction, many of its applications will not be allowed under MiCA,” McGuinness said in a statement in Strasbourg.

Major suppliers will also have to disclose information about their energy consumption as part of the EU’s efforts to reduce the high carbon footprint of cryptocurrencies. The second regulation on fund transfers will lead to greater scrutiny of crypto-asset trading, bringing it closer to the practice of traditional finance. The EU says it will make it harder for criminals to use cryptocurrencies for illegal activities such as money laundering.

Ernest Urtasun, one of the EU lawmakers who passed the bill through parliament, said during the debate that “the rules mark the end of the Wild West era for the unregulated crypto-assets world.”

“For more than a decade, the lack of regulation has caused huge losses for many first-time investors and has become a safe haven for scammers and international crime networks,” he added.

Creating a “safer environment”

However, some criticize the bill for not going deep enough.

Elizabeth McCall, member of the European Central Bank’s supervisory board, wrote in a blog post this month, “Under the principle of proportionality, key CASPs should be subject to both stricter requirements and enhanced supervision: MiCA serves neither.” .

There were also claims that the regulation would hinder innovation, but McGuinness rejected this proposal.

“We believe that having a regulatory framework allows the industry to grow in a more harmonious and safer environment,” he said.

He added that he hopes the rules will become a model for other countries. The rules will come into effect gradually from July 2024, after EU member states have formally enacted them. The EU is also preparing to submit proposals for the digital euro this year.