MiCA: Stablecoin Transaction Cap Will Stifle Crypto Adoption – Lawyers
Concerned lawyers recently raised alarms about the imminent transaction caps that would happen with implementing the Markets in Crypto Assets (MiCA) regulations. Accordingly, legal experts call for a comprehensive review of the European Union’s (EU) pioneer crypto regulatory policy to avert the potential drop in crypto adoption.
Stablecoin Transaction Might Be Stifled – Lawyers
The European Union Parliament announced on May 31, 2023, that it had approved implementing the world’s pioneer comprehensive regulations for the crypto industry. Consequently, the MiCA legislation garnered widespread support within the crypto community.
However, it also brought forth a contentious provision that set a limit of 200 million euros ($219 million) on daily transactions for stablecoins like USDT and USDC. Hence, Chander Agnihotri, and Rachel Cropper-Mawer, senior executives at Clyde and Co, a prominent global law firm, believe the move will negatively affect stablecoin transactions.
According to them, the unrestricted growth of major stablecoins may face significant challenges, and regulators must reassess the imposed daily transaction limits. Recall that stablecoins were introduced to mirror the prices of stable fiat currencies like the USD.
They were also created to counter the price volatility of significant crypto assets like Bitcoin (BTC) and Ethereum (ETH). Nevertheless, following the spectacular collapse of Terra’s TerraUSD (UST) in May 2022 and the brief de-pegging of USDC after the collapse of Silicon Valley Bank in early 2023, regulators started performing strict oversight functions over privately issued stablecoins.
While Agnihotri admitted that regulators were right to make this move, he and his partner, Cropper-Mawer, argued there’s no need to limit transaction amounts.
However, Cropper-Mawer explained that the 200 million euro limit does not equate to a total prohibition on stablecoin. Instead, the issuers must halt any additional issuance and collaborate with regulatory authorities to ensure their transactions remain within the prescribed limits.
Thus, the legal expert highlighted that a potential hindrance to the widespread adoption of larger stablecoins would be a limitation to their usage. Meanwhile, she believed lawmakers would likely reexamine this matter in the coming months.
On the potential dampening effect on stablecoin usage due to existing and incoming regulations, Cropper-Mawer suggested that it would be reasonable to anticipate a more accelerated growth of central bank digital currencies (CBDCs).
She added that it is improbable that EU lawmakers missed the potential negative impact the MiCA bill may have on stablecoins. While the nature of the MiCA legislation has led to massive criticism, Agnihotri acknowledges that the overall response has been favorable.
Meanwhile, Agnihotri stated that a massive benefit of MiCA is enabling startups and smaller entities to enter the market more efficiently, promoting innovation and competition. Like any legislation, there may be areas that would benefit from some fine-tuning, the expert added.
Concerns About MiCA Must Be Addressed – Tether’s CTO
Paolo Ardoino Tether’s chief technology officer (CTO) revealed that there is a need for the EU decision-makers to continue the discussion about MiCA and chart a course to address its rising concerns. Ardoino believes the EU Parliament should revise the MiCA framework before the final guidelines are released for private stablecoin issuers.
However, Ardoino refrained from discussing the intricacies of the legislation and its potential implications for USDT transactions within the region. Like others, Ardoino acknowledged that the imposed daily transaction cap could affect private stablecoins like USDT.
Yet, he emphasized that “the legislation explicitly states that these limits are applicable only in specific use cases for private assets. There have been several criticisms of the yet-to-be-implemented crypto legislation.
Some critics contend that the legislation is too conservative, while others voice concerns about the lack of ample measures to address risks that would impact the financial market’s stability. Nevertheless, Cropper-Mawer believes that the MiCA regulation’s success lies in member states’ ability to implement it within their jurisdictions effectively.
Following its publication in the Official Journal of the EU, the MiCA legislation is set to be implemented in 2024, along with several regulations and guidelines for the crypto industry.
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