On May 31st, an unanticipated regulatory change shook the crypto industry. The European Union enacted the Markets in Crypto-Assets (MiCA) legislation, thus making history. However, amidst the wave of affirmative sentiments, an element of the legislation sparked controversy: the daily transaction cap of 200 million euros (roughly $219 million) for private stablecoins.
Stablecoins, like BTC or Ether, aimed to balance the crypto landscape by inhibiting steep price volatility. Their values are typically tethered to fiat currencies, mainly the US dollar. The global law firm Clyde and Co, as represented by legal director Chander Agnihotri and partner Rachel Cropper-Mawer, stressed potential hurdles that may emerge for large stablecoins.
Recently, private stablecoins found themselves in a spotlight, following a regulatory dilemma involving TerraUSD (UST), a stablecoin operating on an algorithmic model, that collapsed in May 2022. Furthermore, USDC’s temporary disconnection from its peg in early 2023, subsequent to the collapse of the Silicon Valley Bank, added more fuel to the fire. Agnihotri noted these as legitimate reasons for authorities to implement new rules.
Regulation, he contended, could protect investors from large-scale stablecoin failures that could cascade into traditional financial systems which are strongly connected through reserves. According to the duo, the apprehensions should prompt a reexamination of the stablecoin regulatory structure, including the daily transaction limits.
While protective measures are important, restrictions should not stifle innovation. Hence, adjusting legislations to fit the ever-changing crypto landscape is crucial. The 200 million euro ceiling, Cropper-Mawer pointed out, is not essentially a prohibition. Exceeding this daily limit would require issuers to pause further issues and work closely with regulatory bodies.
The new norms may forge a path for central bank digital currencies by dampening the utilization of stablecoins. But Cropper-Mawer clarified that lawmakers are well aware of the possible negative ramifications and hence future amendments to the MiCA are plausible.
The majority of feedback regarding MiCA has been encouraging, mentioned Agnihotri, as it is expected to widen the market access for startups and smaller entities, encouraging innovation and competition. Undoubtedly, the legislation could do with some modifications that could further enhance the European blockchain ecosystem.
Source: Cryptonews
