Stablecoin use could be “stifled” by daily transaction caps in the European Union’s Markets in Crypto-Assets (MiCA) legislation, with some calling for the framework to be revised.
On May 31, MiCA was signed into law which paved the way for the world’s first regulatory guidance on cryptocurrencies to come into effect.
The legislation was received positively by many in the crypto industry, but one of the more controversial measures introduced is the $219 million (200 million euro) cap on daily transactions for private stablecoins such as Tether (USDT) and Circle’s USD Coin (USDC).
EU news
MiCA has been officially signed into law today by the European Parliament President Roberta Metsola and Swedish Rural Affairs Minister Peter Kullgren (Sweden holds the presidency of the Council of the EU atm).
Next steps:
1) Publication in the official journal of… pic.twitter.com/qY8QPnEZ9A— Patrick Hansen (@paddi_hansen) May 31, 2023
Speaking to Cointelegraph, Chander Agnihotri and Rachel Mawer-Cropper, respectively the legal director and partner at global law firm Clyde and Co said the use of large stablecoins could “quickly become stifled” and regulators should look to revisit the daily limits.
Stablecoins aim to mirror the price of fiat currencies — mainly the U.S. dollar — and were introduced as a solution to address the price volatility of cryptocurrencies such as Bitcoin (BTC) and Ether (ETH).
However, in the wake of the collapse of Terra’s algorithmic stablecoin UST in May 2022 and the brief de-pegging of USDC following the collapse of Silicon Valley Bank in early 2023, Agnihotri claimed regulators are well within their rights to have become laser-focused on the regulation of private stablecoins.
“On account of their stronger links to the traditional financial system — through the use of reserves — regulators have been particularly concerned by the possible impact that the failure of a larger stablecoin may have.”
The 200 million euro cap is “not tantamount to a ban” said Mawer-Cropper and if the threshold is passed, then the issuers will be “required to cease further issuing activities and work with regulators to bring transactions under the cap.”
However, Mawer-Cropper noted with the increasing popularity of private stablecoins, it’s anticipated that the use of certain larger stablecoins will “quickly become stifled” but added she anticipates legislators will “revisit this issue.”
With stablecoin use possibly being dampened…
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