KRAKOW, POLAND - 2018/05/28: (EDITORS NOTE: This image has been altered: [Double exposure].) In this photo illustration A double exposure picture with bitcoin coin and European flag. (Photo illustration by Omar Marques/SOPA Images/LightRocket via Getty Images)
Photo illustration: Omar Marques/SOPA Images/LightRocket via Getty Images

The EU’s crypto rules are almost here

Protocol Fintech

Good morning, and welcome to Protocol Fintech. Hope you had a great Fourth! This Tuesday: MiCA moves forward, love and bitcoin and Klarna’s down round.

Off the chain

“If you love nothing, nothing will love you back.” I know, I know, you’re probably thinking I’ve been reading “GuRu” by RuPaul again, but this was Michael Saylor talking about bitcoin. The MicroStrategy CEO loves bitcoin so much that he’s offering it in his company’s 401(k) plan and doubling down as it dropped below $20,000. MicroStrategy’s losses on bitcoin are nearing $1 billion. “Life is what you make it, honey / You don't even need no money.” That’s actually RuPaul.

— Owen Thomas (email | twitter)

The EU moves forward

After months of debate, the EU Parliament and Council reached a provisional agreement on the long-anticipated Markets in Crypto Assets bill last week. And while some in the industry were relieved that it wasn’t the worst-case scenario they’d feared, others were nervous about aspects of the legislation.

Don’t worry about a bitcoin ban, but do worry about sustainability. Language prohibiting proof-of-work tokens, which would’ve effectively banned bitcoin, didn’t make it into the final agreement. That doesn’t mean crypto companies are off the hook.

  • A proposal by Parliament member Stefan Berger that included the ban sparked outcry from the crypto industry. As a result, a version of the bill advanced without the ban.
  • Now, it seems that the EU has come to a compromise: no bitcoin ban, but companies have to disclose how much energy crypto assets consume, and how much carbon is emitted through crypto activities.

Stablecoin regulation was a focus of the bill. With the recent crypto crash and general market downturn, fears of a long crypto winter are mounting, and EU regulators are trying to create a safety net for consumers, delegating stablecoin authority to the European Banking Authority.

  • The MiCA bill will require stablecoin issuers to have a “sufficiently liquid reserve,” with “a one-to-one ratio and partly in the forms of deposits.” That’s broadly similar to the Lummis-Gillibrand bill in the U.S., which only envisions allowing reserve-backed stablecoins, not algorithmic stablecoins like UST, the token that lost its peg and collapsed in May, wiping out billions of dollars.
  • The rationale behind the minimum reserve requirements is another requirement for stablecoin issuers: that customers be allowed to convert their coins to fiat at any time and free of charge, lessening the risks that consumers take on when transacting in stablecoins.
  • Some in the industry seemed to welcome the new requirements. “I've long held that #MICA would be to digital assets what #GDPR was to privacy,” Circle Chief Strategy Officer Dante Disparte said on Twitter.

EU regulators want to know your customers. New fund-transfer rules are a way to enforce know-your-customer and anti-money-laundering requirements on crypto.

  • The transfer of funds rules, part of a package of AML measures that the EU is deciding on, will now widen their scope to include digital assets. Crypto companies must collect information and personal data from their customers for all transfers regardless of size.
  • The crypto industry doesn’t love this, with some saying that the requirements seem overreaching. Ledger CEO Pascal Gauthier argued in a blog post prior to Thursday that the rules will “simply burden every EU citizen and small business, and drag Europe even farther behind competing economies.”
  • An open letter in opposition to the measures from a collective of over 40 crypto firms including Coinbase didn’t sway regulators, who said they want to “ensure the traceability of crypto-asset transfers” for AML reasons.

As MiCA moves on to formal adoption, NFTs could be up next. Although NFTs were deliberately left out of MiCA and the fund-transfer rules, it won’t be long before something comes down the line: The European Commission has the task of coming up with potential NFT rules within the next 18 months.

— Lindsey Choo (email | twitter)


You're either real-time or out of time: Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

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On the money

On Protocol: BlockFi agreed to let FTX buy it for as much as $240 million as part of a financing agreement that included a $400 million credit facility from the crypto exchange.

Tether reduced its commercial paper holdings by almost 60%. The stablecoin issuer said that the goal was to “bring the figure down to zero,” with U.S. Treasury bonds making up most of its reserves instead.

Also on Protocol: Voyager Digital suspended trading, deposits and withdrawals, in a move to buy itself some time to look for “strategic alternatives.” The suspension followed an announcement that Three Arrows Capital had defaulted on a major Voyager loan.

Meta is done with Novi, really this time. The social media giant announced on its Novi website that the blockchain-based money-transfer app will end in September, putting the final nail in the coffin for its Libra project.

Indian regulators clarified when the 1% TDS digital asset tax applies. The 1% tax deducted at source came into effect Friday, but regulators issued a clarification that certain digital assets, such as gift cards, mileage points and subscriptions, can be excluded from the tax.

Invest now, pay less?

Klarna is close to raising new funding at a valuation of about $6.5 billion, which would be far below its last round raised last year, according to the Wall Street Journal. The move is the latest sign of the effects of inflation and the economic downturn in the fintech sector and "buy now, pay later" in particular.

Last June, during a frenzy of interest in "buy now, pay later" providers, Klarna raised $639 million in funding led by SoftBank at a $45.6 billion valuation, which was a big jump from its 2019 funding at a $5.5 billion valuation. Klarna, originally from Sweden, has become known as one of the largest "buy now, pay later" providers globally.

But the economic downturn has hit pay-later providers, along with the rest of the fintech industry. While these companies have said that they are less affected by the downturn than other consumer credit companies, the prospect of a recession could hurt the consumer spending that pay-later companies finance.

Read the full story on

— Tomio Geron (email | twitter)

Coming up

FinTech Junction Summer 2022 is happening next Monday. The event takes place at the Tel Aviv Stock Exchange Conference Center, featuring speakers from IBM, Finastra, CommerzVentures and others.

Fintech Week London 2022 is starting next Monday. The week-long conference will feature speakers from Morgan Stanley, the Financial Conduct Authority, HM Treasury and others.


You're either real-time or out of time: Many of the challenges facing our world today are increasingly complex and critical, such as climate change, talent shortages and supply chain disruptions. Solving these problems requires analyzing large data sets, quickly. Additionally, organizations must use data to predict future issues and then determine the most effective solution.

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Thanks for reading — see you tomorrow!

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