EU Regulators Propose Stricter Rules for Crypto Shareholders

In a move to tighten regulations around the burgeoning crypto industry, EU regulators have unveiled a series of proposals targeting crypto companies and their stakeholders. These proposals are part of the forthcoming Markets in Crypto Assets regulation (MiCA), set to be implemented in December 2024.

The European Union’s watchdogs have outlined measures that would require thorough vetting of crypto company shareholders who hold more than a 10% stake. This scrutiny aims to identify any past convictions or sanctions that might raise concerns about their involvement in the crypto sector.

This move comes amidst growing concerns around high-profile figures in the crypto world. Notable industry leaders such as Sam Bankman-Fried of FTX, Alex Mashinsky of Celsius, and Changpeng “CZ” Zhao of Binance are currently contending with U.S. allegations. They face charges related to misleading customers, defrauding them, or not adhering to federal securities laws.

The MiCA regulations emphasize the importance of maintaining a good reputation for crypto license holders. Specifically, these regulations mandate that both owners and executives of crypto companies should have an untarnished reputation. If they fail to meet this standard, their MiCA authorizations, which grant them the privilege to operate across the 27 EU member states, could be revoked. Feedback on these proposals will be accepted until January.

The EU rulemaking agencies, EBA and ESMA, responsible for banking and securities markets law, further clarified the criteria. They stated that shareholders and board members of crypto service providers should not have any convictions related to money laundering, terrorist financing, or any other offenses that could compromise their reputation. This requirement is not a one-time check but needs to be consistently met.

Drawing parallels from other financial sectors, similar ownership restrictions have been implemented in the past. For instance, former Italian Prime Minister Silvio Berlusconi, who had a prior conviction for tax fraud, faced challenges in owning a significant stake in a bank.

Furthermore, the proposed regulations also target companies that issue stablecoins. These are cryptocurrencies whose value is pegged to other assets, such as fiat currencies. The new measures suggest imposing restrictions on bonuses for staff members of these companies. This move mirrors measures in the banking sector, which were introduced to mitigate excessive risk-taking behaviors.

The EU’s latest proposals underscore the bloc’s intent to bring more transparency and accountability to the crypto sector. By ensuring that key stakeholders in crypto companies maintain a clean record, the regulators aim to foster trust and stability in this rapidly evolving industry. As the crypto landscape continues to evolve, such regulatory measures will play a pivotal role in shaping its future trajectory.

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