At the Korea Blockchain Week, held in Seoul, a European Union representative explained how Terra’s $40 billion collapse could have been prevented under provisions of the EU’s Markets in Crypto Assets (MICA) bill. The spokesperson told the attendees that provisions of the MICA bill require stable coin projects to be more transparent and authorized client withdrawals at request. According to Peter Kersten, MICA can prevent schemes like Terra from coming into the market “which melted away”.
MICA Bill and its Provisions
The landmark bill, which is yet to become law, aims to regularize the growing crypto market in Europe. The provisions of the legislation were agreed upon by European stakeholders after more than 2 years of deliberations.
The provisions of the MICA bill oblige crypto issuers willing to do business in Europe to release a white paper, register with the designated authorities, and have 100% collateralized reserves for stable coins. It is estimated that the rules and provisions of the bill will convert into laws by 2023, however, they are not expected to come into force before 2024.
The mammoth rise of decentralized cryptocurrencies over the past decade has put global governments in a fix. The central banks and regulatory authorities across the globe are trying to come up with a regulatory framework to oversee the transactions in cryptocurrency. In the wake of several collapses and cases of bankruptcies, the regulation of cryptocurrencies is more urgent than ever.
The Terra collapse has alarmed South Korean authorities and pushed them to come up with legislation to govern the cryptocurrency transactions within their boundaries. South Korean regulators said the upcoming Digital Asset Basic Act will take cues from their counterparts in the United States, and Europe, including provisions of the MICA bill. This will help them achieve and improve “global consistency” in crypto regulation.