Lawyers Claim MiCA’s Stablecoin Transaction Cap Hinders Crypto Adoption

Jul. 10, 2023
Lawyers Claim MiCA’s Stablecoin Transaction Cap Hinders Crypto Adoption

MiCA legislation’s transaction limits may hinder stablecoin adoption, creating obstacles for the European Union’s crypto-asset markets. Deploying MiCA with its $216 million cap on stablecoins like USDT and USDC could hinder crypto growth unless modifications are made.

This has led to suggestions for a revision of the framework. Many individuals within the crypto industry reacted favorably to the legislation. They introduced a daily limit of 200 million euros on private stablecoins, such as Tether and USD Coin, causing controversy.

Chander Agnihotri and Rachel Cropper-Mawer, legal director and partner at Clyde and Co, state that substantial stablecoins may encounter obstacles. They suggest regulators reevaluate daily limits for their adoption in the future. Their viewpoint highlights potential challenges and the need for regulatory adjustments.

Regulators have expressed significant concern about the potential consequences that could arise from the failure of a larger stablecoin. This concern is primarily due to its closer ties to the traditional financial system via reserves.

According to Cropper-Mawer, the 200 million euro limit does not mean a complete ban. If the issuers exceed this limit, they must stop issuing further activities and cooperate with regulators to ensure that transactions comply with the cap.

Nevertheless, Cropper-Mawer observed that as private stablecoins gain more traction, certain prominent stablecoins are expected to face constraints in their growth. However, she expressed her belief that lawmakers will likely reassess this matter.

Cropper-Mawer suggested that if the current regulations diminish the adoption of stablecoins, it would be reasonable to expect that central bank digital currencies could experience faster growth than they otherwise would.

Nevertheless, she promptly recognized that the MiCA legislators are unlikely to have overlooked the potential adverse consequences. These regulations might bring, particularly considering the widespread use of private stablecoins in other markets.

Private Stablecoins Under MiCA: Ardoino Advocates For Dialogue & Framework Revision

Tether’s chief technology officer Paolo Ardoino would need continued conversation and a potential framework revision before the guidelines were enacted upon private stablecoin providers.

He expressed the importance of engaging in additional discussions regarding the technical implementation standards to clarify specific provisions to the market. He eagerly anticipates the results of these discussions soon.

Ardoino refrained from providing details on how the legislation might impact the trading of USDT in Europe but expressed admiration for MiCA as a praiseworthy initiative. He regarded the ruling as possibly the most extensive one the industry has encountered thus far.

He recognized that the daily trading limit could affect private stablecoins like USDT. The legislation specifies that these restrictions are applicable only when the stablecoin is utilized for specific objectives,” he emphasized.

According to Cropper-Mawer, the effectiveness of MiCA will primarily rely on its enforcement within each member state. Lawmakers, particularly given the rapid pace of innovation in the cryptocurrency sector, will further support this through ongoing scrutiny.

There has been a variety of critiques. Specific individuals suggest it is cautious, while others have raised concerns about its insufficient efforts to address potential financial market stability risks.

Rida Fatima

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An ardent wordsmith with a rich five-year background in delving into the realms of finance and cryptocurrencies. Alongside curating captivating blogs, Unique's talents extend to crafting imaginative and engaging content.