MiCA's stablecoin transaction cap stifles crypto adoption, say lawyers

The widespread utilization of stablecoins might face hindrances due to the imposition of daily transaction limits under the European Union's Markets in Crypto-Assets (MiCA) legislation. Several individuals are urging for an overhaul of the regulatory framework in order to address this issue.

MiCA, a groundbreaking legislation, was officially enacted on May 31, opening the door for the implementation of the world's inaugural set of regulatory instructions concerning cryptocurrencies.

Many people in the cryptocurrency sector reacted favorably to the new law, but there was quite a lot of disagreement regarding one specific regulation that was introduced: a limitation of $219 million (equivalent to 200 million euros) on the amount of transactions private stablecoins like Tether (USDT) and Circle's USD Coin (USDC) can handle in a single day.

MiCA has been formally ratified today by the President of the European Parliament, Roberta Metsola, and the Minister of Rural Affairs of Sweden, Peter Kullgren (as Sweden currently holds the Council of the EU presidency).

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In an interview with Cointelegraph, Chander Agnihotri and Rachel Cropper-Mawer, who hold the positions of legal director and partner at the prominent law firm Clyde and Co, expressed their concerns about the potential hindrance faced by the widespread adoption of major stablecoins. They suggested that regulators should reconsider the daily restrictions imposed on these digital assets.

Stablecoins strive to replicate the value of traditional currencies, particularly the U.S. dollar. They were introduced as a remedy to tackle the fluctuating prices of cryptocurrencies like Bitcoin (BTC) and Ether (ETH).

However, following the failure of Terra's algorithmic stablecoin UST in May 2022 and the temporary detachment of USDC after the collapse of Silicon Valley Bank in early 2023, Agnihotri argued that regulators have every right to prioritize the regulation of private stablecoins.

According to Cropper-Mawer, the 200 million euro limit does not amount to a prohibition. If the limit is exceeded, the issuers will have to stop issuing more and collaborate with regulators to ensure the transactions fit within the limit.

Nevertheless, Cropper-Mawer observed that as private stablecoins gain more traction, it is expected that the utilization of particular prominent stablecoins will "rapidly diminish." However, she also predicts that lawmakers will "reassess this matter" in the future.

Given that the existing regulations may hinder the adoption of stablecoins, Cropper-Mawer suggested it would be prudent to consider the possibility that central bank digital currencies (CBDCs) could experience a faster growth rate than they would have otherwise.

Nevertheless, she promptly observed that the lawmakers responsible for MiCA are highly unlikely to have overlooked the potential adverse consequences that these regulations could bring, particularly when considering the widespread utilization of private stablecoins in other economies.

Even though MiCA has faced some criticism, as expected for a comprehensive and broad law, Agnihotri observes that most of the feedback it has received has been mostly favorable.

"MiCA will open up market opportunities for start-ups and smaller organizations, encouraging creativity and rivalry. Similar to any legal framework, there might be areas that could be improved upon."

Tether Opines On MiCA

Paolo Ardoino, the chief technology officer of Tether, informed Cointelegraph that there must be ongoing discussion and a possible modification of the structure before the instructions could be put into effect for private stablecoin providers.

"We eagerly anticipate the results of these talks in due time, as they will bring much-needed clarity to the market regarding specific provisions," he stated, emphasizing the significance of continued deliberations on the technical implementation standards.

Title: The European Perspective on Cryptocurrency: Economist Explores MiCA and the Outlook for Stablecoins In today's blog post, we delve into the exciting world of cryptocurrency within the European context. Our focus revolves around the insights provided by an esteemed economist who deep dives into the implications of the Markets in Crypto-Assets (MiCA) regulations and the potential trajectory of stablecoins. With the ever-evolving landscape of digital currencies, it is crucial to understand how Europe is positioning itself. MiCA, introduced by the European Union, stands as a significant development in the regulation of crypto-assets. Our renowned economist closely examines the implications and potential impact of these regulations on the market. Additionally, the economist explores the future prospects of stablecoins within the European markets. Stablecoins, a type of cryptocurrency designed to minimize price volatility, play a key role in providing stability and facilitating transactions within the crypto realm. Understanding the economist's analysis of the potential growth and adoption of stablecoins sheds light on the evolving nature of the European cryptocurrency landscape. By dissecting the economist's breakdown of MiCA and their extensive insights into stablecoins, readers can gain valuable knowledge about the European approach to cryptocurrency. Stay tuned as we unravel the intricacies of these topics and provide a comprehensive overview of the potential advancements and challenges in the European crypto sphere.

Ardoino refrained from discussing the details of the law and its potential impact on the trading of USDT in Europe but he expressed admiration for MiCA as a praiseworthy endeavor and referred to the legislation as arguably the most extensive one the industry has witnessed so far.

He admitted that the daily trading limit might affect private stablecoins like USDT. However, he mentioned that "the law clearly states that these restrictions are applicable only in specific situations where the stablecoin is being utilized."

There have been various criticisms, with some suggesting that it is excessively careful and others raising concerns that it does not sufficiently address risks to the stability of the overall financial market.

According to Cropper-Mawer, the effectiveness of MiCA will essentially rely on how it is implemented by individual countries and whether policymakers will constantly reassess it, particularly given the fast pace of technological advancements in the cryptocurrency sector.

The implementation of MiCA is set to take place after it is published in the Official Journal of the EU. Various regulations and guidelines for cryptocurrency companies are anticipated to commence around 2024.

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