Lawyer: MiCA's Stablecoin Trading Caps Hinder Crypto Adoption

Author: TOM MITCHELHILL, COINTELEGRAPH; Compiler: Songxue, Jinse Finance

Daily transaction caps in EU Markets in Cryptoassets (MiCA) legislation could “inhibit” the use of stablecoins, with some calling for changes to the framework.

On May 31, MiCA was signed into law, paving the way for the world’s first regulatory guidelines for cryptocurrencies to go into effect.

**The legislation was well received by many in the crypto industry, but one of the more controversial measures introduced was the $219 million (€200 million) daily transaction cap on private stablecoins such as Tether. **

EU News

Today MiCA was officially signed into law by the President of the European Parliament, Roberta Metsola, and the Swedish Rural Affairs Minister, Peter Kullgren (Sweden chairs the EU ATM Council).

Next step:

1. Publish in the official journal… pic.twitter.com/qY8QPnEZ9A

— Patrick Hansen (@paddi_hansen) May 31, 2023

Chander Agnihotri and Rachel Cropper-Mawer, legal directors and partners at global law firm Clyde and Co, said the use of large stablecoins could “be dampened soon” and regulators should consider revisiting daily limits.

Stablecoins are designed to mirror the price of fiat currencies, primarily the U.S. dollar, and have been introduced as a solution to price volatility in cryptocurrencies like Bitcoin and Ethereum.

However, after the collapse of Terra algorithmic stablecoin UST in May 2022 and the collapse of Silicon Valley Bank in early 2023 and the brief decoupling of USDC, Agnihotri asserted that regulators have every right to focus on private stablecoins.

“Because of their greater linkage to the traditional financial system — through the use of reserves — regulators have been particularly concerned about the possible impact of the collapse of large stablecoins.”

Cropper-Mawer said the €200 million cap “does not amount to a ban” and that if that threshold is exceeded, issuers would be “required to halt further distribution activity and to work with regulators to keep transactions below the cap”.

However, Cropper-Mawer noted that with the growing popularity of private stablecoins, it is expected that the use of some larger stablecoins will be “quietly suppressed,” but she added that lawmakers are expected to “revisit this issue.”

Cropper-Mawer said that because current rules may inhibit the use of stablecoins, it is “sensible” to assume that central bank digital currencies (CBDCs) may “prosper at a faster rate than would otherwise be the case.”

However, she was quick to point out that it is unlikely that MiCA lawmakers would ignore the potential negative impact these regulations could have, especially when considering the prevalence of private stablecoins in other markets.

“If other jurisdictions allow relatively unrestricted use of stablecoins, this could have an adverse impact on the EU’s crypto market.”

Despite the expected level of criticism for such broad and broad legislation, Agnihotri noted that the majority of feedback on MiCA has been largely positive.

“Under MiCA, start-ups and smaller entities will be able to better access markets, fostering innovation and competition. As with any legislation, some parts will benefit from adjustments.”

Tether speaks at MiCA

Tether’s CTO, Paolo Ardoino, noted that continued dialogue and possible revisions to the framework are needed before guidelines can be issued for private stablecoin providers.

“Further discussions on technical implementation standards will be critical to clarify certain terms to the market and we look forward to seeing the outcome of these discussions in due course,” he said.

Ardoino did not comment on the specifics of the legislation, and how it might apply to USDT transactions in Europe, but he praised MiCA as a “commendable” initiative and described the legislation as “arguably the biggest change the industry has seen so far.” the most comprehensive legislation ever".

He acknowledged that the daily transaction cap could have an impact on private stablecoins like USDT. However, he stated that “legislation states that these restrictions apply when stablecoins are used for certain purposes.”

There has been a range of criticism, with some calling it too cautious and others concerned that it has failed to adequately mitigate threats to the stability of broader financial markets.

Cropper-Mawer explained, “Ultimately, the success of the MiCA will largely depend on how it is enforced at the member state level and whether lawmakers continue to scrutinize it, especially when considering the pace of innovation in the crypto industry.” .”

#MiCA came into force at the end of June.

To start implementation, #ESMA with stakeholders will launch 3 public consultations in July, October and Q1 2024 →

Details on the duration of each public comment period. pic.twitter.com/QFlERttwxR

— ESMA - EU securities market regulator (@ESMAComms) June 12, 2023

MiCA will be implemented after its publication in the Official Journal of the European Union, and many regulations and guidelines for cryptocurrency companies are expected to be implemented sometime in 2024.