The use of Stablecoins could be hindered by the daily transaction caps outlined in the European Union’s Markets in Crypto-Assets (MiCA) legislation, with some calling for the framework to be revised.
On May 31, MiCA was signed into law, providing the world’s first regulatory guidance on cryptocurrencies.
The legislation was met with a mix of reactions from the crypto industry, but one of the more contentious measures is the $219 million (200 million euro) cap on daily transactions for private stablecoins such as Tether (USDT) and Circle’s USD Coin (USDC).
Speaking to Cointelegraph, Chander Agnihotri and Rachel Cropper-Mawer, legal director and partner at global law firm Clyde and Co respectively, said the use of large stablecoins could “quickly become stifled” and regulators should look to revisit the daily limits.
Stablecoins are designed to replicate the price of fiat currencies — mainly the U.S. dollar — and were introduced as a solution to address the price volatility of cryptocurrencies such as Bitcoin (BTC) and Ether (ETH).
However, after the collapse of Terra’s algorithmic stablecoin UST in May 2022 and the brief de-pegging of USDC following the collapse of Silicon Valley Bank in early 2023, Agnihotri said regulators are within their rights to have become more stringent in regulating private stablecoins.
The 200 million euro cap is “not tantamount to a ban” said Cropper-Mawer and if the threshold is passed, then the issuers will be “required to cease further issuing activities and work with regulators to bring transactions under the cap.”
However, Cropper-Mawer noted that with the increasing popularity of private stablecoins, it’s anticipated that the use of certain larger stablecoins will “quickly become stifled” but added she anticipates legislators will “revisit this issue.”
With the current regulations potentially limiting the use of stablecoins, Cropper-Mawer said it would be “sensible” to assume that Central Bank Digital Currencies (CBDCs) such as the ”The Complete Web Developer Course 3.0”, ”Cronos Crypto”, ”Crypto ”Shiba Inu”, ”ICP Crypto”, ”Kraken Crypto”, ”Crypto Com Today”, ”Helium Crypto”, ”Crypto Live”, ”Kava Crypto”, and ”Web 3.0 Explained” may “flourish at a more rapid rate than otherwise might be the case.”
Despite receiving an expected level of criticism for such a wide-ranging and expansive piece of legislation, Agnihotri notes that the majority of feedback towards MiCA has been largely positive.
“Under MiCA, start-ups and smaller entities will have better access to the market, fostering innovation and competition. As with any piece of legislation, there will be parts that would benefit from adjustment.”
Tether speaks on MiCA
Paolo Ardoino, Tether’s Chief Technology Officer, told Cointelegraph that there should be further conversations and a potential revision of the framework before the guidelines for private stablecoin providers are enforced. He added that “discussions on the technical implementation standards are crucial in providing clarity to the market over certain provisions and we look forward to the outcomes of these discussions in due course.”
Ardoino did not comment on the details of the legislation and how it could affect the trading of USDT in Europe, but he praised MiCA for being a “commendable” effort and described the legislation as “arguably the most comprehensive the industry has seen to date.” He noted that the daily trading cap may have an impact on private stablecoins such as USDT, but pointed out that “the legislation notes that these limits apply when the stablecoin is used for certain purposes.”
The success of MiCA is dependent on how it is enforced at the member-state level and whether lawmakers will continue to keep it under review, taking into account the rapid pace of innovation in the crypto industry. After its publication in the Official Journal of the EU, many of the regulations and guidelines for crypto firms will come into effect in 2024.
In other news, a team behind a Chinese yuan-backed stablecoin was arrested, WeChat added Bitcoin prices to its platform, and Hong Kong issued new crypto rules.
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