The European Union (EU) has announced plans to bring in a set of groundbreaking provisional rules to govern crypto assets.
Representatives from the European parliament and EU states struck an agreement on Thursday that details measures to guard against market abuse and manipulation within the volatile sector.
In a bid to rein in the “wild west'' of crypto assets, the rules will require that cryptocurrency firms provide information regarding the environmental impact of their assets.
The legislation has been dubbed the Markets in Cryptoassets (MiCA) directive, and will regulate the crypto sector with common rules across all 27 member states.
It is the first time globally that politicians have attempted to supervise the industry on such a scale, and is expected to come into force around the end of 2023.
The EU approved new rules on overseeing crypto asset service providers, consumer protection and environmental safeguards.
Stefan Berger, the German MEP who led negotiations on behalf of the parliament, said: “Today, we put order in the wild west of crypto assets and set clear rules for a harmonised market.
“The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act.”
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However, non-fungible tokens (NFTs) offered to the public at a fixed price will be exempt from the new rules, though the bloc said they could eventually be included at a future date.
Bitcoin was up 0.6% on Friday to $19,171 (£15,930) on the back of the news after suffering its biggest quarterly drop in more than a decade, while ethereum climbed 2.7% to $1,046.
A recent decline in cryptocurrency prices has seen the total value of the market nosedive from $3tn last year to less than $900bn. Bitcoin has lost nearly 60% in the last six months and endured its worst month ever in June, according to Bloomberg data.
The MiCA law is expected to set a benchmark for other regulatory regimes for crypto globally, which are currently largely unregulated.
Both the UK and the US are yet to approve similar rules, although regulators in both countries have warned of the need for stronger measures.
Leading payment infrastructure company Mercuryo welcomed the decision, calling for regulators in other jurisdictions to follow suit to provide much more clarity for businesses and consumers.
Petr Kozyakov, chief executive of Mercuryo, said: “This provisional agreement by EU regulators to safeguard the crypto sector is a welcome step in the right direction.
"There is a real desire for a clear set of rules to protect individuals and businesses who have adopted cryptocurrencies already, to weed out bad actors, and to encourage others to adopt crypto as a result.
“The crypto market is rapidly evolving to reflect an innovative and dynamic ecosystem. An effective regulatory framework would unleash the potential of our sector, and open it up to even wider adoption and utility.
"I hope that other regulators will follow suit and work together with industry leaders to deliver a clear and effective global framework which will allow the sector to flourish.”