Legal Experts: MiCA’s Transaction Cap on Stablecoins Hampers Crypto Adoption
The European Union’s MiCA legislation, which was implemented on May 31, has raised concerns about the potential hindrance of stablecoin adoption due to its daily transaction limits. In fact, some individuals are urging for a revision of the framework.
While the regulatory guidance on cryptocurrencies has generally been well-received in the crypto industry, the controversial aspect of the legislation is the introduction of a cap of $219 million (200 million euro) on daily transactions for private stablecoins like Tether (USDT) and Circle’s USD Coin (USDC), both of which are pegged to the value of $1.00.
In a conversation with Cointelegraph, Chander Agnihotri and Rachel Cropper-Mawer, who hold positions at the global law firm Clyde and Co, expressed their concerns about the potential stifling of large stablecoin usage and suggested that regulators should reconsider the daily transaction limits.
Stablecoins were introduced as a solution to address the volatility of cryptocurrencies like Bitcoin (BTC) and Ether (ETH) by mimicking the value of fiat currencies, particularly the U.S. dollar.
Following the collapse of Terra’s algorithmic stablecoin UST in May 2022 and the temporary de-pegging of USDC after the failure of Silicon Valley Bank in early 2023, Agnihotri argued that regulators have valid reasons to focus on regulating private stablecoins.
These stablecoins have stronger ties to the traditional financial system through reserves, making regulators concerned about the potential impact of a larger stablecoin’s failure.
Cropper-Mawer clarified that the 200 million euro daily transaction cap does not equate to a ban. If this threshold is exceeded, issuers will be required to halt further issuance and cooperate with regulators to bring transactions within the limit.
However, Cropper-Mawer acknowledged that the popularity of certain larger stablecoins is likely to diminish rapidly, potentially prompting legislators to revisit the issue. Considering the current regulations dampening stablecoin use, she suggested that central bank digital currencies (CBDCs) may gain momentum at a faster pace.
Nevertheless, she acknowledged that MiCA lawmakers are likely aware of the potential negative impacts of these regulations, especially when compared to the relatively unrestricted use of stablecoins in other jurisdictions. If stablecoin usage is permitted with fewer restrictions elsewhere, it could adversely affect the crypto market in the European Union.
Despite receiving some criticism for its extensive scope, Agnihotri mentioned that the majority of feedback on MiCA has been positive. The legislation is expected to provide better market access for startups and smaller entities, fostering innovation and competition. However, he also acknowledged that like any legislation, certain aspects could benefit from adjustments.
It is worth noting that once the Official Journal of the EU publishes MiCA, the implementation of the regulations and guidelines for crypto firms is anticipated to commence in 2024.
