On Sunday, the first wave of comprehensive, landmark European Union legislation to regulate digital assets will take effect. With its Markets in Crypto Assets Regulation (MiCA) framework, Europe has succeeded in doing what other jurisdictions, including the United States, have been avoiding: providing clarity legally and regulatoryly for not one part of the digital asset market but for all of it.
Driven by the specter of Big Tech, like Meta’s Diem (formerly Libra) initiative, entering financial markets, or because of concerns about unregulated cryptocurrencies, the past 5 years have been marked. marked by coordinated policy developments in Europe. MiCA will have a profound impact in permanently connecting digital assets to the real economy and doing so in a uniquely European way.
In the first decade of crypto, much of the industry was characterized by a constant and shocking boom-bust cycle, which in many ways made it a uniquely American market. As a result, the US dollar has become not only the benchmark for digital assets (thanks to the steady rise of stablecoins, which now exceed $150 billion), but also the reserve currency of internet finance, as well as the real world. MiCA aims to solve this problem by giving euro-denominated stablecoins, which will be classified as e-money tokens under new EU rules, a chance at success and a strong consumer market of 441 million people.
While some aspects of MiCA are protectionist in nature, focused on protecting European consumers and investors from the fraud and risks that have plagued the rapidly growing crypto market, there is also a degree of economic and technological sovereignty at play. This is most evident in the fact that offshore stablecoins – diplomatically referred to as global stablecoins – are not permitted under MiCA. Stablecoins pegged to other currencies are primarily subject to European e-money licensing requirements, which require compliance with safety, financial crime, and other rules. If a stablecoin issuer offers other crypto-asset services, it must obtain a second license – as a digital asset service provider (DASP), virtual asset service provider (VASP), or crypto-asset service provider (CASP), depending on the jurisdiction. This requirement is a basic level of compliance to safeguard digital assets. Beyond these licensing requirements, gone are the days of amorphous crypto companies with no significant presence in the EU.
Indeed, MiCA is as much about promoting jobs and economic competitiveness as it is about protecting consumers and markets. Licensed entities must have a responsible “mind and body” within the EU jurisdiction, which allows them to passport their activities across the union thanks to the harmonisation of regulations across Europe – although there is still a long way to go for national regulators to ensure that MiCA is introduced smoothly into the single market.
For the cryptocurrency industry and its existential association with the banking sector, MiCA marks a profound change that only the most serious players are ready to embrace. For example, in the resurgent stablecoin category, where the US dollar is the reference currency, MiCA mounts a literal financial cliff where unregulated or non-compliant tokens will eventually be delisted. listed or their access is heavily restricted by cryptocurrency exchanges. The reason is very simple. Instead of treating stablecoins as a fringe financial product or just a poker chip in a crypto casino, MiCA brings stablecoins into line with long-standing crypto rules. Therefore, all stablecoins offered by EU cryptocurrency exchanges must comply with the rules for electronic tokens. This gives token holders the right to redeem at par for the underlying currency directly from the issuer, a way to strengthen collective accountability and consumer protection across the digital asset value chain. Digital assets are interconnected – from the wallet, to the exchange, and finally to the issuer.
Under the current EU model, all regulated stablecoins would now have a common regulatory framework, which would not only encourage competition but ultimately lead to broader fungibility and interoperability across the EU market. Like all new or comprehensive rules, MiCA is imperfect and in some places too prescriptive, to the point that EU policymakers are considering MiCA 2.0, which could potentially fill certain gaps in the regime in areas such as NFTs, Defi, and others. While MiCA has now provided European crypto market participants with clear rules, on the US side, imperfect rules or a lack of federal regulation have allowed the industry to flourish. Should the transatlantic tech rift widen – or should the US and its key EU partners aspire to a common digital common ground?
If US policymakers are in the mood to compete with the EU on digital assets, a “true NAFTA for digital assets” could be contemplated across North America. However, a long-term alternative would be to establish a transcontinental Western alliance for digital assets that preserves the democratic values shared in these emerging markets and with Exponentially growing technologies shape the future.
Now that the world has MiCA, it is time for the United States to act and reassert its position as a global leader in financial services innovation and regulation.
Tether, Circle, and other stablecoin issuers are racing
Tether, Circle and Issuers stablecoin Other major players will soon come under scrutiny in the European Union.
With new regulations coming into effect on June 30, in addition to the appropriate licenses to operate within the 27-nation trading bloc, stablecoin issuers also face strict limits on the number and value of transactions set out in the Markets in Crypto Assets (MiCA) Regulation.
These regulations could make some of the largest stablecoin issuers, including Tether with USDT (the world’s largest stablecoin by market capitalization) vulnerable, said Robert Kopitsch – secretary general of Blockchain for Europe –. and Circle with USDC (second ranked stablecoin), which cannot operate in the EU.
“Non-EU stablecoins, denominated in euros – if they exceed a certain threshold they will need to be stopped being issued and used, and that is a problem because 99% of the stablecoin market is denominated in USD.”
MiCA is the EU’s comprehensive set of rules for the crypto industry.voted into law last year, it allowing companies licensed by a member state to operate across the bloc.
According to Article 23 Under the framework, companies must stop issuing a stablecoin that is referenced by an asset that is used as a medium of exchange for more than 1 million transactions or a value of more than 200 million euros (about $215 million) a day. The stablecoin rules come into effect at the end of the month, and other provisions are expected to come into effect in December.
Mark Foster – head of EU policy at the Crypto Innovation Council – said tough rules created to prevent stablecoins like project Diem that Facebook’s now abandoned alternative to the euro.
European Banking Authority Spokesperson (EBA) said These limits are put in place “to protect the monetary system.”
Blockchain for Europe and the Digital Euro Association – a consultancy – have tried against these measures in a 2022 letter, argued that what they were doing was, in effect, discouraging major stablecoin issuers.
An EBA spokesperson shared that the provisions do not prevent companies from issuing stablecoins denominated in assets other than euros. What matters is whether they are used as a medium of exchange, payment for goods or services. If so, specific restrictions will apply.
Jón Egilssonc – co-founder of Monerium – said in a statement that issuers can serve Europeans without limitations when tokens are not a medium of exchange. He said that includes transactions between currencies, peer-to-peer transactions and where a cryptocurrency is exchanged for the corresponding electronic token.
Although the EBA has not yet clearly defined how these values will be measured, one document Consultation revealed that transactions with both parties outside the EU may be excluded, but any transactions with at least one party in the EU may be included.
Accordingly, a transaction will include both on-chain and off-chain transfers. Movement between addresses or accounts of the same person is not considered a transaction.
A spokesperson has said that a final report on how the EBA will measure transactions is likely to be released later this month.
Companies that have had to suspend issuance will need to submit a plan showing they can comply with the limits before being reinstated. This could be difficult: USDT’s daily global trading volume is around 27 billion USDand USDC’s is 5 billion USD according to CoinGecko data.
Another barrier is obtaining the necessary certification.
“When you are a stablecoin issuer in Europe, you need to have an e-money institution license or a banking license, which is a costly and time-consuming process,” said Kopitsch.
So Tether, Circle, and other issuers have just three days to secure their cryptocurrency licenses to operate legally.
A company spokesperson said Circle has registered with conditions Digital asset service provider with the French Financial Markets Authority in April, aiming to obtain an e-money license ahead of schedule.
“Circle is committed to full compliance with EU MiCA regulations. We plan to port EURC to the EU and issue it from Circle France. Additionally, we intend to issue USDC to EU clients from the same entity under MiCA and subject to regulatory approval.”
EURC is the company’s euro-backed stablecoin. The equivalent of Tether is EURT. According to information from MiCA, earlier this week, the cryptocurrency exchange Bitstamp has cancel Tether USDT Listing. OKX has also delisted USDT in March, said it wanted to focus on euro-zone liquidity.
“Tether has been working closely with our European exchange partners on a range of requirements, including those related to the ongoing listing of USDT and other Tether tokens, as well as the interpretation of key regulatory provisions,” said Paolo Ardoino, CEO of Tether, in a statement. “While Tether remains optimistic about the implementation of MiCA, it is important that the stablecoin regulatory policies enacted are balanced, protect consumers, and foster growth in our emerging industry.”
How the industry progresses will depend European Commission and the upcoming commissioners New European Parliament elected.
Kopitsch said about the restrictive nature of stablecoin rules:
“The question is what happens next because there is a growing awareness that there needs to be a solution.”
Itadori
Bitcoin Magazine
