Will the EU’s MiCA Rules Win the War Against Crypto Scams?

By Michael B. Cohen

Vice President of Global Operations


Are you concerned about cryptocurrency? Have you asked, “Is crypto a scam?” Digital currencies aren’t inherently fraudulent. However, the ever-rising numbers of bitcoin scams have caused people to think twice before buying, trading, or mining bitcoin, Ethereum and other digital coins. 

Despite Crypto Winter when digital currencies tumbled to a fraction of their price and the increase in bitcoin scams, it’s clear that digital currencies and blockchain technology are here to stay. 

Instead of trying to fight cryptocurrency, governments around the world are finding ways to make digital currencies safer through regulation. In fact, Central Banks are considering adopting their own digital euros and dollars. 

The European Union has taken bold steps toward regulating cryptocurrency. The aim is to provide transparency and oversight to these markets, to keep consumers safe, protect the environment and reduce and fight crypto scams.

What Is MiCA?

These proposals are known as MiCA, or Markets in Crypto Assets. They include TFR or “travel rules” that require those who send and receive cryptocurrencies to identify themselves. The details about MiCA are currently being negotiated and these rules are expected to take effect sometime in 2023. 

In summary, MiCA deals with the following issues:

  • Money laundering
  • Crypto scam prevention
  • Greater accountability of crypto platforms
  • Reduction of carbon footprint in crypto mining
  • Stablecoin regulation

Cybercriminals, whether they are in charge of bitcoin scams or other types of fraud, engage in money laundering. Reporting requirements on crypto platforms will prevent money laundering because those involved in illegal activities can’t hide behind anonymous bitcoin wallets and the blockchain. 

The new rules have something similar to  Know Your Customer rules for traditional financial companies, but they can be stricter for bitcoin transactions. For instance, the minimum threshold for requiring identification verification is usually 1,000 EUR, whereas the minimum for the crypto transactions is expected to be 0 EUR. This means all crypto transfers will require identification. 

Like other financial companies, crypto companies and platforms will be required to release details about their identity, and market capitalization and give full financial disclosures. They will also be obligated to compensate customers for financial losses if fraud is proven. 

Bitcoin mining can cause environmental damage, given the huge carbon footprint involved in the process. MiCA will investigate the environmental impact of crypto mining and will make provisions encouraging the use of alternative energy and technology to make bitcoin mining cleaner and more energy efficient. 

Are stablecoins actually stable? Under new MiCA rules, stablecoins must have proven reserves of fiat currency, and these reserves must be liquid. Customers will have the right to cash out their stablecoins upon request. 

The most controversial aspect of MiCA’s stablecoin rules is that it limits stablecoin volume to 2 million EUR daily and will limit the use of non-euro backed securities.

Will MiCA Prevent Crypto Scams?

MiCA is likely to weed out a lot of potential crypto scams, at least for European consumers. The rules affect not only European-based crypto services but also those who are trying to find European customers. 

Since crypto scams tend to thrive in darkness and anonymity, the requirement for disclosure and identifying information are likely to deter cyber criminals from targeting European customers. Also, the requirement that crypto platforms compensate victims will make them less likely to tolerate the proliferation of bitcoin scams on their platforms. 

However, it’s important for European consumers to rely on MiCA to protect them entirely. Cybercriminals find ways to skirt regulations and operate under the radar. Even though Europeans will have the right to compensation for crypto scams, they still need to prove their claims. 

How can you prove that your money was stolen by a crypto scam? The first step towards crypto  recovery is a crypto investigation report. Our experts will analyze your case thoroughly and give you the information the authorities need to track down bitcoin frauds. Get started tracking down your funds, and ask us about an investigation report.