Raphael Stevens

The European Commission, EU lawmakers and member states hammered out an agreement on reforms Thursday.
The new law, known as Markets in Crypto-Assets (MiCA), is the first attempt at creating a comprehensive regulatory framework for digital assets in the region.
EU lawmaker Stefan Berger said the rules will “put order in the Wild West of crypto assets.”

Bitcoin is a volatile asset, and has been known to swing more than 10% higher or lower in a single day.
Jakub Porzycki | Nurphoto | Getty Images

EU officials on Thursday secured an agreement on what is likely to be the first major regulatory framework for the cryptocurrency industry.
The European Commission, EU lawmakers and member states hammered out a deal in Brussels after hours of negotiations. The move came a day after the three main institutions finalized measures aimed at stamping out money laundering in crypto.

The new rules come at a brutal time for digital assets, with bitcoin facing its worst quarter in more than a decade.
The landmark law, known as Markets in Crypto-Assets, or MiCA, is designed to make life tougher for numerous players in the crypto market, including exchanges and issuers of so-called stablecoins, tokens that are meant to be pegged to existing assets like the U.S. dollar.
Under the new rules, Stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. They also face being limited to 200 million euros in transactions per day if they become too big.
While EU member states will be the main enforcers of the rules, the European Securities and Markets Authority, or ESMA, is also being given powers to step in to ban or restrict crypto platforms if they are seen to not properly protect investors or threaten market integrity or financial stability.
“Today, we put order in the Wild West of crypto assets and set clear rules for a harmonized market that will provide legal certainty for crypto asset issuers, guarantee equal rights for service providers and ensure high standards for consumers and investors,” said Stefan Berger, the lawmaker who led negotiations on behalf of the European Parliament.

MiCA will also address environmental concerns surrounding crypto, with firms required to disclose their energy consumption as well as the impact of digital assets on the environment.
A previous proposal would have scrapped crypto mining, the energy-intensive process of minting new units of bitcoin and other tokens. However, it was voted down by lawmakers in March.
The rules won’t affect tokens without issuers, like bitcoin, however trading platforms will need to warn consumers about the risk of losses associated with trading digital tokens.
Regulators also agreed on measures that would reduce anonymity when it comes to certain crypto transactions.
Authorities are deeply concerned about exploitation of crypto-assets for laundering ill-gotten gains and evasion of sanctions — particularly after Russia’s ongoing invasion of Ukraine.
Transfers between exchanges and so-called “un-hosted wallets” owned by individuals will need to be reported if the amount tops the 1,000-euro threshold, a contentious issue for crypto enthusiasts who often trade digital currencies for privacy reasons.
Non-fungible tokens (NFTs), which represent ownership in digital properties like art, were excluded from the proposals. The EU Commission has been tasked with determining whether NFTs require their own regime within 18 months.

Un-stablecoins

The rules follow the collapse of terraUSD, a so-called “algorithmic” stablecoin that tried to maintain a $1 value by using a complex algorithm. The debacle resulted in hundreds of billions of dollars being wiped from the entire crypto market.
“The EU is not happy about stablecoins generally,” said Robert Kopitsch, secretary general of crypto lobbying group Blockchain for Europe.

Policymakers have been skeptical of such tokens — which aim to be pegged to existing assets, such as the dollar — ever since Facebook botched an attempt at launching its own token in 2019. Authorities feared private digital tokens could end up threatening sovereign currencies like the euro.
Paolo Ardoino, chief technology officer of Tether, said the world’s biggest stablecoin issuer welcomed regulatory clarity.
In addition, Dante Disparte, chief strategy officer at Circle, said the EU framework represented a “significant milestone.”
MiCA “will be to crypto what GDPR was to privacy,” he said, referring to groundbreaking EU data protection rules that set the standard for similar laws elsewhere in the world, including California and Brazil.

Reducing fragmentation

Overall, MiCA is the first attempt at creating comprehensive regulation for digital assets in the EU. While some of its stricter policies have rattled a few crypto firms, several industry insiders see the move as a positive step and believe Europe could lead the way on crypto regulation.
The rules are expected to come into force as early as 2024, a landmark move that would put the bloc ahead of both the U.S. and Britain in rolling out laws tailored to the crypto market.
“Harmonization of the market is key in order to really generate bigger and scaling bigger crypto companies in Europe,” said Patrick Hansen, an advisor at the venture fund Presight Capital.
“Europe is lacking huge crypto companies right now, and fragmentation is one of the reasons why.”
Coinbase is seeking licenses in several European countries including France, said Katherine Minarik, the firm’s vice president of legal. She told CNBC the exchange will be able to “passport” its services into all 27 EU countries under MiCA.

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The Atlantic hurricane season is in full swing, and a new exchange-traded fund that focuses on disaster recovery has launched just in time for it.
The first-of-its-kind Procure Disaster Recovery Strategy ETF invests in companies working to reduce risk and motivate sustainable recovery from natural disasters around the world.

“Our partners at VettaFi and the team that helped construct this index looked at things like hurricanes, floods, droughts, wildfires, tornadoes — natural disasters that are occurring all around the globe — and what companies are actually stepping up to help us in those efforts,” ProcureAM CEO Andrew Chanin told CNBC’s “ETF Edge” this week.
The ETF, which trades under the ticker FEMA, bundles companies across sectors including industrials, energy and materials. “These are the companies that really help bring our lives back to normal when we need them most,” Chanin said.
Holdings in the FEMA ETF include communications tech company Fujitsu, risk assessment firm Verisk Analytics, Jacobs Engineering Group and cloud computing firm VMware.
Chanin calls the ETF “a very diversified basket,” including companies in various industries that work on disaster prevention as well as recovery.
Separately, he told CNBC that creation of the FEMA ETF was inspired by Hurricane Katrina, which hit the Gulf Coast in 2005. While attending school at Tulane University in New Orleans, Chanin considered the financial and human tolls that come with major natural disasters.

“One of the first things I did when I was down in New Orleans, when we heard Hurricane Katrina coming, was everyone was going to Home Depot to buy plywood. And, then you need to go and you need to purchase more stuff — whether it’s shingles, whether it’s things to repair, whether it’s paint — after these disasters,” Chanin said. “It’s a wide range of companies that are all involved throughout different parts of the life cycle.”
Since 1980, the U.S. has undergone 323 weather and climate disasters totaling $2.2 trillion in costs, according to the National Centers for Environmental Information, an agency operated by the National Oceanic and Atmospheric Administration.
Since its launch on June 1, the FEMA ETF is off about 11%. More

Investors rolled $516.7 billion from workplace retirement plans into traditional individual retirement accounts in 2018.
Mutual funds in 401(k) plans tend to be cheaper than those in IRAs, according to The Pew Charitable Trusts. Workers who rolled money to IRAs in 2018 would have paid $45.5 billion in extra fees over 25 years, in aggregate, Pew estimates.
However, workers won’t necessarily always be better served by keeping money in their workplace plan. IRAs have some advantages and aren’t always less costly.

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IRA rollovers are common for job switchers, retirees

Investors rolled $516.7 billion from workplace plans into traditional IRAs in 2018, the latest year for which data is available. That’s nearly 28 times more money than as contributed to traditional IRAs that year.
A Pew survey from 2021 found that 46% of recent retirees rolled at least some of their workplace retirement funds to an IRA, and 16% of near retirees plan to do so.
A rollover may not be optional, either: About 15% of 401(k) plans don’t allow workers to retain funds in the plan when they retire, according to a survey conducted by the Plan Sponsor Council of America, a trade group.

How much money rollover IRA fees may cost investors

The typical “hybrid” fund in a 401(k) plan is 0.19 percentage points cheaper than the same fund available to IRA investors, according to the Pew study. (A hybrid fund holds both stocks and bonds.)
That fee differential, which may seem negligible, amounts to big bucks over many years.

Using those figures, Pew estimates that investors who rolled over in 2018 would have collectively lost about $980 million in a year due to extra fees. Over 25 years, their nest eggs would be reduced by about $45.5 billion in aggregate due to fees and lost earnings, according to the analysis. That’s just from a single year’s worth of rollovers.
The typical fee differential in 401(k) plans versus IRAs is even larger for stock funds and bond funds — 0.34 and 0.31 percentage points, respectively.

Mutual fund share classes have different fees

Pew’s analysis examines fees according to mutual fund “share classes.”
Basically, the same fund can have multiple share classes that carry different fees, also called an “expense ratio.” They fall into two basic camps: “institutional” shares, which carry higher investment minimums and are generally available to employers and other institutions; and “retail” shares that carry lower minimums and are generally meant for individual investors.
Institutional shares generally have lower fees than retail shares.

The Pew study assumes a 401(k) saver invests in the institutional version of a mutual fund, while a rollover would be to the retail version of the fund. The study estimates how such a rollover might impact individual retirees in different circumstances.
In one example, a 65-year-old woman who retires with $250,000 in her 401(k) would end up with about $20,500 less in savings at age 90 due to higher IRA fund fees, given certain assumptions — a “significant loss for a person living on a fixed income,” the study said.
Those assumptions include: annual fees of 0.46% and 0.65% in a 401(k) and IRA, respectively; a 5% average annual rate of return; and account withdrawals of $1,000 a month to supplement Social Security benefits.

What to consider before you roll over retirement funds

When you’re deciding whether to leave assets in a workplace retirement plan or roll them into an IRA, there are many factors to consider:

Cost. Fees won’t always be higher in an IRA relative to a 401(k) plan. Not all 401(k) plans use cheaper “institutional” shares. Many IRA funds may be cheaper than those in your workplace plan. Those who want to roll over should look for funds with equivalent or lower expenses relative to funds they owned in their 401(k), Pew said.

Convenience. IRAs can serve as a central repository for all or most of your retirement funds, Scott said. People with multiple 401(k) accounts can roll all that money into one IRA, which may be easier for some savers to manage.

Flexibility. Many 401(k) plans may not allow for as much flexibility around withdrawing money as retirees would like, either. For example, nearly 31% of 401(k) plans didn’t allow for partial or periodic withdrawals in 2020, according to the PCSA survey.

Investment options. Overall, savers may benefit from leaving money in their 401(k) when they leave an employer if they’re happy with their investments, according to the report. But it’s also worth noting that your investment options in a 401(k) are limited to those your employer and plan administrator have selected. With an IRA, the menu is much broader. Certain retirement investments like annuities are largely unavailable to 401(k) savers, too.

“Certainly there are lots of situations in which a rollover would make sense,” Scott said.
“The rollover [itself] is not the problem,” he added. “It’s really understanding what the fees are.”

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