Although MiCA will provide far regulatory clarity, the new framework will put strict regulations on crypto firms. On June 30, European Union (EU) lawmakers reached a political agreement on crypto-asset regulation.
The final trialogue addressed, among other things, supervisory architecture, AML provisions, and stable coins policy.
After reviewing the agreement, Seth Hertlein, Global Head of Policy at Ledger, stated that the regulation, “will profoundly impact Europe’s future competitiveness and the viability of its Web3 industry.”
While there were many “hits” in the proposed framework, Hertlein also expressed his reservations.
Stablecoins will be restricted in size and scope
Stefan Berger, a member of the European Parliament and the Rapporteur for the Markets in Crypto-Assets (MiCA) framework, announced the news on Twitter, adding that he was pleased that the “balanced” agreement would include concessions such as no ban on Proof-of-Work (PoW) technologies.
The agreement establishes the first major regulatory framework for cryptocurrencies, but it comes at a difficult time for the industry.
Given that the Terra UST de-peg was a factor in current market conditions, a point of contention among EU lawmakers in hammering out a deal was an appropriate stable coin policy.
The provisional agreement requires exchanges and stable coin issuers to follow new, more stringent rules in order to avoid a repeat of what happened at Terra and to increase consumer protections.
Stablecoins must hold sufficient redemption reserves to cover withdrawals under the proposal.
There will also be a daily transaction threshold for the largest operators, limiting their scope and market influence.
“Stable coins like tether and Circle’s USDC will be required to maintain ample reserves to meet redemption requests in the event of mass withdrawals. Stablecoins that become too large also face being limited to 200 million euros in transactions per day.”
To read our blog on “UST tragedy means death for algorithmic stablecoins, co-founder Tether,” click here