The Mica law comes into force on June 30. Too vague, too restrictive, the law is controversial and worries professionals in the cryptocurrency industry. Ultimately, stablecoins like USDT or USDC could disappear completely in Europe.
The Mica law, why is it important for stablecoins?
The “Markets in Crypto-Assets Regulation” (MiCA) will soon apply to the crypto-asset market. The stated objective? To strengthen consumer confidence and stabilize the cryptocurrency market in Europe. The main provisions applicable to issuers and traders of crypto-assets […] relate to transparency, publication of information, and authorization and monitoring of transactions ” can be read on the website of the European Parliament, which initiated this law.
MiCA focuses particularly on stable cryptocurrencies. It mainly targets industry giants, such as Circle (USDC), and Tether (USDT). To continue to offer their stablecoins in Europe, these operators will notably have to obtain a specific license, similar to that required for “banking establishments”.
Consequence: Binance, Coinbase, and other major platforms will have to adapt. They will have to verify that their cryptocurrency offering complies with this new regulation. This is why Binance has warned its users of an upheaval on stablecoins. In a recent email addressed to its customers, the exchange nevertheless wants to be reassuring “Binance will not delist these stablecoins. […] We will put in place some restrictions for EEA users but only on certain products, and we will offer alternatives with regulated stablecoins or other crypto-assets.”
https://x.com/_RichardTeng/status/1797671401245053423
Why is the EU against stablecoins?
Why is the European Union targeting stablecoins in particular? This is an obvious response to the fiasco of Terra Luna and its stablecoin, the UST. Because from Brussels’ perspective, the risks inherent in stablecoins are too great. In the institution’s sights: opaque capital reserves, a lack of guarantees, and questionable solidity on the part of cryptocurrencies of this type. The FTX affair had done nothing to improve this distrust.
Unofficially, Brussels is also pursuing other objectives. Stablecoins allow users to avoid the famous tax on cryptocurrencies, while benefiting from a means of securing their crypto gains. By staying in stablecoins, you avoid a conversion into euros, which is taxable, as long as you want to stay in the cryptocurrency ecosystem, without withdrawing from a traditional bank.
Furthermore, geopolitical issues are present. Europe wants to preserve its sovereignty vis-à-vis the United States. Stablecoins are in fact very largely supported by American companies. However, they are a gigantic capital sucker. Finally, stable cryptocurrencies could overshadow the digital euro project.
Regulate at all costs: a counterproductive European strategy?
Some cryptocurrency players accuse the European Union of hindering innovation. Worse, by forcing Binance to withdraw their USDT offering, investors could be forced to turn to unregulated, and therefore riskier, platforms. However, we know that DeFI involves more risks. The risk of excessive regulation is also a flight of companies established in Europe. Middle East, Asia… there is no shortage of exile destinations. An argument taken up by former MP Pierre Person, who declared in 2022 that « The European Union is shooting itself in the foot ».
Recently, Tether had expressed its doubts about the MiCA law, raising the possibility of leaving Europe permanently. For its part, the company Circle, which issues USDC, had committed to playing the game and meeting all regulatory criteria.
A legal micmac that is difficult to apply
The problem is that this new European regulation on stablecoins has left little time for players in the ecosystem to prepare. Barely a year, for a legal project which turns out to be enormous. The other problem is that the texts concerning stable crypto-assets lack clarity. « There is uncertainty over how MiCA is writtenaccording to Faustine Fleuret, who heads ADAN, the Association for the Development of Digital Assets. « We can expect that on July 1, there will be a certain tolerance ».
In a context in which the price of bitcoin is falling again, the uncertainty over USDT or USDC is therefore not good news for investors. Especially since the market alone is currently worth $1.27 trillion.
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Martin
Fascinated by the history of Bitcoin and the cypherpunk movement, I think that citizens must reinvest in the field of money. My goal ? Democratize and make visible the potential of blockchain and cryptocurrencies.
