EU Crypto Lobby Fights MiCA Limits on US Dollar Stablecoins
- Crypto lobby groups seek clarification from EU lawmakers on inbound restrictions on foreign-dominated stablecoins
- Euro-backed stablecoins are not yet an alternative as they represent a tiny share of the crypto market
Dollar-pegged stablecoins could be blocked in all 27 countries of the European Union if the bloc’s new legislation on crypto-asset markets (MiCA) takes effect in its current form.
The historic European Union cryptography law has already been approved, but the technical details have yet to be ironed out.
Blockchain for Europe and the Digital Euro Association over the weekend sent a letter to the Council of the EU, a collegiate body formed by EU member states, in a bid to reverse controversial rules that would effectively nullify any large stablecoins project related to something other than the euro.
The crypto industry claims that MiCA imposes restrictions on the issuance and use of stablecoins that are not denominated in euros or another official currency of an EU member state.
This would possibly ban USDT from Tether, USD coin from Circle, and Binance USD from Binance, which account for a huge chunk of crypto trading volumes globally.
“The three largest stablecoins by trading volume risk being banned in the EU from 2024, due to quantitative limits on the issuance and use of EMTs [e-money tokens] denominated in foreign currencies under MiCA”, the two associations are in dispute in the letter.
“Restricting their use in the Eurozone would lead to a lockdown of crypto markets here, with potentially destabilizing effects and a major outflow of crypto business outside of the EU.”
If MiCA is implemented as is, the groups believe there could be “extreme short-term price volatility due to dislocation effects”, alongside higher prices and weaker competition in the developing sector. digital assets. The result would “stifle” innovation in the EU, they said.
Both associations are seeking clarification from lawmakers, arguing that any foreign currency limitations should be very narrow in scope.
In particular, they called for precise definitions of “uses as a medium of exchange” under the MiCA to protect the role of USD-referencing stablecoins in crypto trading and in providing liquidity to traders. DeFi pools (decentralized finance).
Patrick Hansen, EU Policy Expert and Crypto Venture Advisor at Presight Capital, who supports this joint letter, wrote on Twitter that providing clarity “is also in the interest of the EU, as it wants these issuers to apply for a licence”, which too broad a scope would discourage.
EU says euro-pegged stablecoins won’t compete anytime soon – MiCA won’t help
At the moment, European crypto investors cannot rely on euro-dominated stablecoins, as they represent only a small share of trading volumes.
“It is unrealistic to expect them to [investors] to replace USD-referencing stablecoins in crypto trading, let alone do so seamlessly by January 2024,” the associations wrote.
According to a June report by the European Central Bank on the international role of the euro, the currency’s share in crypto markets is “extremely low,” at just 0.2%.
Euro-based stablecoins are therefore less liquid and “tend to be sold in the same way as other risky assets rather than acting as a vehicle in digital transactions and exchanges.”
Circle’s latest euro-issued stablecoin, the Euro Coin (EUROC), launched in June, has given market participants some confidence in a major euro-pegged stablecoin, although it’s unclear when. it will be commonly used.
Currently, EUROC has a market capitalization of just $76 million, according to CoinGecko. Data, ranking it as the 320th most important token. For scale, dollar-denominated USDT is the third-largest cryptocurrency by market value, at over $67.5 billion.
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