The Mica law comes into force on June 30. Too vague, too restrictive, the law is controversial and worries professionals in the cryptocurrency industry. In the long term, 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-assets market. The stated objective? 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 we read on the European Parliament websiteat the initiative of this law.
MiCA is particularly focused on stablecoins. It is mainly targeting industry giants such as Circle (USDC) and Tether (USDT). In order to continue offering their stablecoins in Europe, these operators will have to obtain a specific license, similar to that required for “banking institutions”.
Consequence: Binance, Coinbase, and other major platforms will have to adapt. They will have to check that their cryptocurrency offering complies with this new regulation. This is why Binance 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 stable cryptocurrencies in particular? This is an obvious response to the fiasco of Terra Luna and its stable cryptocurrency, UST. Because seen from Brussels, the risks specific to 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 not helped this distrust.
Unofficially, Brussels also pursues other objectives. Stablecoins allow users to avoid the famous tax on cryptocurrencies, while benefiting from a way to secure their crypto earnings. By remaining in stablecoins, we thus avoid a conversion into euros, which is taxable, as long as we wish to remain in the ecosystem of cryptocurrencies, 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 overly strict regulation is also a flight of companies established in Europe. The Middle East, Asia… there is no shortage of exile destinations. An argument taken up by the former MP Pierre Person, who declared in 2022 that “ the European Union is shooting itself in the foot ».
Recently, Tether had expressed its doubts regarding the MiCA law, raising the possibility of leaving Europe permanently. For its part, the company Circle, which issues USDC, was committed to playing the game and meeting all regulatory criteria.
A legal mess 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 written, according to Faustine Fleuretwho heads ADAN, the Association for the Development of Digital Assets. “ We can expect that by July 1st there will be some 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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