FameEX Hot Topics | Lawyers argue that MiCA's stablecoin transaction cap hinders cryptocurrency adoption

The introduction of the Markets in Crypto-Assets (MiCA) legislation in the European Union, which includes a daily transaction cap of $216 million on stablecoins like USDT and USDC, has raised concerns about stifling cryptocurrency adoption. Some experts argue that these caps could hinder the use of stablecoins and have called for a revision of the framework.

MiCA, signed into law on May 31, 2023, marked a significant milestone as the world's first regulatory guidance on cryptocurrencies. Chander Agnihotri, legal director, and Rachel Cropper-Mawer, partner at global law firm Clyde and Co, believe that the use of large stablecoins could quickly become stifled under the current regulations. They emphasize the importance of regulators revisiting the daily transaction limits. The collapse of Terra's algorithmic stablecoin UST in May 2022 and the brief de-pegging of USDC following the collapse of Silicon Valley Bank in early 2023 have heightened regulators' focus on private stablecoin regulation. Agnihotri points out that due to their stronger links to the traditional financial system, regulators are particularly concerned about the potential impact of a larger stablecoin failure.

Cropper-Mawer clarifies that the 200 million euro cap does not equate to a ban. If the threshold is exceeded, issuers will be required to halt further issuance and collaborate with regulators to bring transactions within the cap. However, she anticipates that certain larger stablecoins will see their use stifled as private stablecoins gain popularity. She expects legislators to revisit this issue in the future.

Considering the potential dampening effect of the current rules on stablecoin usage, Cropper-Mawer suggests that central bank digital currencies (CBDCs) may experience accelerated growth. However, she acknowledges that MiCA lawmakers are likely aware of the potential negative impacts of these regulations, especially when compared to the prevalence of private stablecoins in other markets. Allowing relatively unrestricted stablecoin usage in other jurisdictions could have adverse effects on the crypto market in the EU, warns Cropper-Mawer.

Despite receiving criticism for its wide-ranging and comprehensive nature, MiCA has received largely positive feedback. Agnihotri emphasizes that under MiCA, start-ups and smaller entities will have improved market access, fostering innovation and competition. While acknowledging that adjustments may be beneficial, he highlights the overall positive reception of the legislation. In summary, the introduction of MiCA's legislation and the daily transaction caps on stablecoins have sparked concerns about hindering cryptocurrency adoption. Experts advocate for revisiting the current framework, as they believe it could stifle stablecoin use.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.