MiCA Stablecoin Scheme Implemented Under Clouds of Uncertainty

MiCA (Cryptoasset Markets Regulation), which establishes a regulatory framework for cryptoassets and related services in the European Union, began to be applied in phases. This regulation, which aims to boost innovation and guarantee consumer protection, had its final text approved in October 2022 and partially entered into force on June 30, 2023, initially focusing on the stablecoins regime.

Within the scope of MiCA, cryptoassets are divided into three main categories: asset-referenced tokens, e-money tokens and other types of tokens. This regulatory framework directly impacts the issuance, commercialization and services related to these assets in the European Economic Area.

Full regulation for crypto asset service providers will be implemented six months after the stablecoin regime comes into effect, scheduled for the end of December 2023.

One of the big questions that arises with the implementation of MiCA is how it affects popular stablecoins like USDT and USDC. Issuers of these tokens will now need specific authorizations and follow enhanced prudential requirements, including increased capital requirements and risk management, under the direct supervision of the European Banking Authority, rather than national authorities.

Stablecoin issuers must also secure sufficient reserves to maintain the value of the tokens issued, with strict regulations on the composition and quality of these reserves. These changes introduce a layer of complexity and uncertainty, especially in relation to electronic money and banking licenses, the process of which is known to be costly and time-consuming.

As of June 30, the outlook for electronic money licenses among stablecoin issuers was still uncertain, which contributes to the atmosphere of insecurity. Additionally, there are limits on issuing stablecoins that exceed one million daily transactions or a total value of €200 million.

These restrictions raise questions about whether the rules apply to all stablecoins or only to those denominated in euros. This scenario has direct implications for the most widely used stablecoins, such as USDT and USDC, and has already affected support on several major exchanges.

Exchange Uphold, for example, announced the discontinuation of support for several MiCA-compliant stablecoins. Bitstamp and Kraken are also reevaluating their support for USDT, while Binance has already announced restrictions on USDT services.

Disclaimer:

The views and opinions expressed by the author, or any person mentioned in this article, are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading cryptocurrencies carries a risk of financial loss.