Some claim that unless the MiCA is changed, the adoption of cryptocurrencies could be “stifled” due to the $216 million cap that will be placed on stablecoins like USDT and USDC.
Daily transaction caps in the Markets in Crypto-Assets (MiCA) regulation of the European Union, which went into effect on May 31, may make stablecoin use more difficult, prompting calls for a change of the framework.
Although the adoption of MiCA was mostly praised by the cryptocurrency community, one of its contentious provisions is the implementation of a €200 million daily transaction cap on private stablecoins like Tether and Circle’s USD Coin.
The usage of huge stablecoins may be “stifled” by these daily limits, according to legal experts Chander Agnihotri and Rachel Cropper-Mawer of the international law firm Clyde & Co. They recommend that regulators reconsider the restrictions put in place.
By reflecting the value of fiat currencies, especially the US dollar, stablecoins were developed as a response to the price volatility of cryptocurrencies like Bitcoin and Ether.
Given their closer connections to the traditional financial system through reserves and the collapse of Terra’s algorithmic stablecoin UST in May 2022 and the temporary de-pegging of USDC following the failure of Silicon Valley Bank earlier in 2023, regulators have focused on the regulation of private stablecoins.
Agnihotri claims that regulators have voiced worries about the possible repercussions of the failure of a bigger stablecoin. The €200 million cap is not a prohibition, but if it is surpassed, issuers must cease all future issuance activities and work with authorities to bring transactions inside the allotted amount.
Cropper-Mawer predicts that the existing laws will limit the use of some larger stablecoins, but she also predicts that lawmakers will likely revisit this topic in the future.
Cropper-Mawer thinks that central bank digital currencies (CBDCs) may increase more quickly than personal stablecoins in light of the potential dampening effect on stablecoin use. She does note that the MiCA lawmakers were probably aware of the possible drawbacks, and she also emphasizes how common private stablecoins are in other markets.
Tether gives opinion on MiCA
Before regulations are put in place for private stablecoin providers, Paolo Ardoino, the Chief Technology Officer of Tether, underlined the necessity for ongoing discussion and potential amendments to the MiCA framework.
In order to give the market certainty, Ardoino noted that more conversations on technical implementation standards are essential. He also expressed anticipation for the results of these negotiations.
Ardoino praised MiCA as a good attempt and called it one of the most thorough laws the industry has seen to yet, while he did not precisely address how the legislation would apply to the trading of USDT in Europe.
The daily trading cap established by MiCA, according to Ardoino, may have an effect on privately held stablecoins like USDT, but he pointed out that the legislation specifically states that these limits only apply when the stablecoin is utilized for those reasons.
The MiCA Act has come under fire from a number of sources; some claim it is unduly conservative, while others are concerned about its ability to successfully reduce threats to the stability of the larger financial market.
The success of MiCA, according to Rachel Cropper-Mawer, will primarily depend on how it is implemented at the state level and whether legislators will continue to evaluate and modify it in order to keep up with the quick pace of innovation in the crypto business.