Daily transaction limits in EU markets in crypto-assets (MICA) legislation could “choke” the use of stablecoins, with some calling for the framework to be revised.
On May 31, the MiCA was signed into law, paving the way for the enactment of the world’s first regulatory guidelines for cryptocurrencies.
The legislation was welcomed by many in the crypto industry, but one of the more controversial measures introduced was a $219 million (200 million) cap on daily transactions for private stablecoins such as Tether (USDT) and Circle’s USD Coin (USDC). euro) limit.
The MiCA was officially signed today by the President of the European Parliament, Roberta Metsola, and the Swedish Minister of Rural Affairs, Peter Kullgren (Sweden holds the presidency of the EU ATM Council).
1) Publication in the official journal… pic.twitter.com/qY8QPnEZ9A
— Patrick Hansen (@paddi_hansen) 31 May 2023
Speaking to Cointelegraph, Chander Agnihotri and Rachel Cropper-Mawr, legal director and partner at global law firm Clyde & Co., respectively, said that the use of major stable coins “could soon take off” and that regulators should pay attention to daily limits. Needed
Stable coins are intended to reflect the price of fiat currencies – primarily the US dollar – and were introduced as a solution to address volatility in the price of cryptocurrencies such as bitcoin (BTC) and ether (ETH).
However, in the wake of the collapse of Terra’s algorithmic stablecoin UST in May 2022 and the brief dissolution of USDC following the collapse of Silicon Valley Bank in early 2023, Agnihotri stressed that regulators are right to be laser-focused on regulation. Private Stable Coins.
“Due to their strong ties to the traditional financial system – through their use of reserves – regulators are particularly concerned about the potential impact of large stablecoin failures.”
The EUR 200 million limit “does not equate to a ban,” Cropper-Mawr said, and that if the limit is exceeded, issuers must “work with regulators to prevent further issuance activity and bring transactions below the limit.” would need to be done”.
However, Cropper-Mawr said that with the growing popularity of private stablecoins, the use of some large stablecoins is expected to be “quickly stifled,” but added that she hopes lawmakers will “re-think the issue.” do.”
With the potential decline in the use of stable coins due to current regulations, Cropper-Mower said it would be “wise” to assume that central bank digital currencies (CBDCs) “could develop faster than they would otherwise”.
However, he was quick to note that MiCA lawmakers are unlikely to overlook the potential negative consequences of these regulations, especially considering the prevalence of private stablecoins in other markets.
“If the relatively unfettered use of stable coins is allowed in other jurisdictions, this could have a negative impact on the crypto market in the EU.”
Despite the expected level of criticism for such a comprehensive and comprehensive law, Agnihotri says that most of the response to the MiCA has been largely positive.
“Under MiCA, start-ups and small entities get better access to the market, which fosters innovation and competition. Like any part of the law, there will be parts that would benefit from revision.
Tether Speaks on MiCA
Tether CTO Paolo Ardoino told Cointelegraph that continued negotiations and a possible review of the framework will be needed before guidelines can be issued for private stablecoin providers.
“Further discussions on the technical implementation standards are important to provide clarity to the market on certain provisions and we look forward to the outcome of these discussions in due course,” he added.
Connected: Crypto in Europe: The Economist Analyzes MiCA and the Future of Stable Coins
Ardoino did not comment on the specifics of the law and how it could potentially apply to USDT trading in Europe, but praised MiCA for being a “commendable” initiative and called the law “probably the most comprehensive the industry has seen to date.” described as “is”. ,
He acknowledged that the daily trading limit could have an impact on private stablecoins such as USDT. Nevertheless, he added that “the law specifies that these limits apply when stablecoins are used for certain purposes.”
There has been a range of criticism, with some claiming that it is overly cautious and others expressing concern that it does not sufficiently reduce threats to the stability of the wider financial market.
Cropper-Mawr pointed out that “Ultimately, the success of MiCA will largely depend on how it is implemented at the state level and whether lawmakers will continue to follow through, especially given the speed at which Innovation is happening in the crypto industry.”
#mica Takes effect at the end of June.
To start the implementation, #esma With 3⃣ public consultations commencing in July, October and Q1 2024 with relevant stakeholders → https://t.co/AvePQSapZp.
Details on the duration of each public comment period. pic.twitter.com/QFlERttwxR
– ESMA – EU Securities Market Supervisor (@ESMAComms) 12 June 2023
The MiCA will be implemented after being published in the Official Journal of the EU, with a number of rules and guidelines for crypto businesses expected to start sometime in 2024.
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