An Unsettling Cap
Stablecoin use could potentially be stifled by the daily transaction caps set by the European Union’s Markets in Crypto-Assets (MiCA) legislation. These limits, some argue, could curb the widespread adoption of cryptocurrencies unless there is a reconsideration of this regulatory framework.
A First-of-its-kind Legislation
MiCA, which was signed into law on May 31, established the world’s first regulatory guidelines for cryptocurrencies. Despite its warm reception in many crypto industry circles, the 200 million euro cap on daily transactions for private stablecoins like Tether and Circle’s USD Coin has caused a stir.
Legal Experts Weigh In
Chander Agnihotri and Rachel Cropper-Mawer from global law firm Clyde and Co warn that this cap could limit the use of large stablecoins and encourage regulators to revisit the daily limits. Stablecoins, designed to reflect the price of fiat currencies, were introduced to counter the price volatility of cryptocurrencies like Bitcoin and Ether.
The Potential Impact of the Cap
According to Cropper-Mawer, while the 200 million euro cap doesn’t equate to a ban, it would require issuers to halt further issuing activities and collaborate with regulators if the limit is exceeded. She further observes that as private stablecoins gain popularity, the use of larger ones could become stifled, yet she anticipates legislators will eventually revisit this issue.
The Possible Rise of Central Bank Digital Currencies
Cropper-Mawer also hints at a possible acceleration in the adoption of central bank digital currencies due to the constraints placed on stablecoins. Nonetheless, she doesn’t believe that MiCA lawmakers overlooked the possible adverse impacts these regulations could have, especially considering the prevalence of private stablecoins in other markets.
Tether’s Take on MiCA
Paolo Ardoino, Tether’s chief technology officer, commends MiCA as an initiative and describes it as the most comprehensive legislation to date. However, he emphasizes the necessity for further dialogue and potential revision of the framework before the guidelines are imposed on private stablecoin providers.
The Success of MiCA
Cropper-Mawer argues that the success of MiCA largely depends on its enforcement at the member-state level and lawmakers’ willingness to review it, especially considering the rapid pace of innovation in the crypto industry.
MiCA is set to be implemented following its publication in the Official Journal of the EU. Most regulations and guidelines for crypto firms are expected to take effect in 2024.
