Regulation
MiCA’s impact on the EU stablecoin industry: key changes ahead
MiCA: Ambiguities remain
However, even for those crypto companies that have rigorously planned for MiCA compliance, some ambiguities still remain.
As Jason tells us, MiCA is a broad guideline for regulatory compliance, but there remains additional accompanying regulation that has yet to come into force.
“MiCA provides broad protections for companies, and while many know at a high level what they need to do, there are some ambiguities that make compliance more challenging,” he says.
“The rules are not over. ESMA and other European authorities are in the process of issuing technical standards and other second-order rules that should provide further clarification.
“Additionally, further regulatory clarity is needed on certain topics and business models, such as NFTs and smart contracts.”
“Wrong” regulation for stablecoins?
Indeed, many have warned that MiCA could lead to serious implications for stablecoins, particularly regarding localization requirements. It is expected that there will also be some Stringent limits imposed on non-EU crypto firms.
Localization requirements are much more difficult to adapt than prudential changes, including the requirement for stablecoin providers to hold 30% of fiscal reserves in bank accounts, split across several local banks. The figure is 60% for Electronic Money Tokens (EMTs).
Jason says: “One area where regulations are currently flawed is stablecoins. Creating standards for issuers and reserves is a good idea, as is closing the market to those issuers/instruments that do not meet the minimum standards.
“However, MiCA also introduces limits on the amount of stablecoin transactions that can occur within a given period. This will prove to be a major barrier to adoption and a disadvantage for EU-based stablecoins if it is not corrected in the next iteration of the rules”.
This could represent a major blow to many stablecoin providers, although it must be said that the true negative impact of MiCA on stablecoins may not yet be fully evident or understood.
Perhaps the next few weeks will tell us more, when MiCA goes into effect for stablecoins on June 30, 2024.