Lawmakers in the European Parliament have approved the world’s first comprehensive package of rules aimed at regulating the cryptocurrency industry.

In a vote Thursday, the EU Parliament voted 517 in favor and 38 against to pass the Markets in Crypto Act, or MiCA. The legislation, which seeks to reduce risks for consumers buying crypto assets, will mean providers can become liable if they lose investors’ crypto-assets.

The rules will impose a number of requirements on crypto platforms, token issuers and traders around transparency, disclosure, authorization, and supervision of transactions, the EU Parliament said in a statement Thursday.

Platforms will be required to inform consumers about the risks associated with their operations, while sales of new tokens will also come under regulation.

Stablecoins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. Stablecoins that become too large also face being limited to 200 million euros ($220 million) in transactions per day.

The European Securities and Markets Authority, or ESMA, will be given powers to step in and ban or restrict crypto platforms if they are seen to not properly protect investors, or threaten market integrity or financial stability.

MiCA also addresses environmental concerns surrounding crypto, with firms forced to disclose their energy consumption as well as the impact of digital assets on the environment.

Mairead McGuinness, European commissioner for financial services, lauded the law’s approval Thursday and said she expects the rules to start applying “from next year.”

Andrew Whitworth, EMEA policy director for blockchain firm Ripple, said the parliamentary blessing marked “an important milestone for the crypto industry around the world.”

“Consistency in implementation around the EU will be key in providing crypto companies with the operational clarity to fuel innovation across Europe and guard against unwitting fragmentation of the Single Market,” Whitworth told CNBC via email.

“As part of this, there is a need to ensure that the legislation is applied proportionally with regards to how different companies’ crypto offerings are treated, based on the risk profiles of their activities.” 

Parliament also cleared a separate law which aims to reduce the anonymity involved in transfers of cryptocurrencies like bitcoin and stablecoins, voting 529 to 29 to pass the Transfer of Funds regulation.

This applies the so-called “travel rule,” which requires financial companies to screen, record and communicate information on both sender and recipient, to crypto transactions to help combat money laundering.

Transfers between exchanges and so-called “self-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.

In a tweet, Changpeng Zhao, CEO of the world’s largest crypto exchange Binance, said his company was “ready to make adjustments to our business over the next 12-18 months to be in a position of full compliance.”

Binance is under intense scrutiny from regulators over how it operates. In March, the Commodity Futures and Trading Commission sued Binance, Zhao and Binance’s former chief compliance officer, Samuel Lim, alleging the company actively solicited U.S. users without permission.

Zhao hailed MiCA as a “pragmatic solution to the challenges we collectively face.”

Regulators have sought to rein in the crypto market in the wake of numerous catastrophic industry failures. In May, terraUSD, a controversial stablecoin project, unraveled in a $60 billion flameout after investors lost confidence in its technical underpinning.

The demise of terraUSD caused a chain reaction in the industry, with various other firms, including Three Arrows Capital, BlockFi and Voyager Digital going bust as well. FTX, formerly the fourth-largest crypto exchange, filed for bankruptcy in November in the most high-profile crypto industry failure to date.

The move puts the EU a step ahead of the U.S. and U.K., which are yet to bring in formal rules for the crypto space. A U.K. official on Monday said specific crypto regulation could come into force within a year or so.

Once the EU laws come into effect, crypto companies will be able to use their licenses in one European country to “passport” their services across various member states. Crypto companies have been scrambling to obtain licenses from various European authorities and open new offices in anticipation of the law coming into effect.

Crypto exchanges Coinbase and Kraken recently got virtual asset service provider licenses in Dublin. Blockchain firm Ripple is seeking a license from the Irish central bank.

U.S. crypto companies have been looking abroad for expansion in response to tough regulatory moves in their home turf. The Securities and Exchange Commission issued Coinbase with a Wells notice, which is often one of the final steps before the regulator formally issues charges, last month.

On Thursday, Coinbase CEO Brian Armstrong told CNBC at a fintech event the company is prepared for a “years-long” legal battle with the SEC.

He said separately in a talk on stage that the U.S. “has the potential to be an important market in crypto” but right now is not delivering regulatory clarity. If this goes on, he said, then Coinbase would consider options of investing more abroad, including relocating from the U.S. to elsewhere.

– CNBC’s Arjun Kharpal contributed to this report

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