Although MiCA is generally viewed as positive for regulating stablecoins, it raises concerns about clustering, especially among smaller cryptocurrency companies.
Global stablecoin regulations will take a crucial step forward with the upcoming regulatory framework in Europe, according to Binance, the world’s largest cryptocurrency exchange.
The European Union’s Markets in Crypto-Assets Act (MiCA) is the first comprehensive regulatory framework for cryptocurrencies and could provide regulation for the industry to lawmakers globally.
MiCA will be a “crucial component” of developing a comprehensive global stablecoin ecosystem, according to a Binance spokesperson, who told Cointelegraph:
“By establishing clear rules governing issuance, reserve management and redemption, MiCA promotes market stability and consumer protection, and supports innovation through legal certainty.”
MiCA’s comprehensive approach will serve as a “global standard” for other jurisdictions, which may seek to harmonize their own frameworks with MiCA, in an effort to achieve greater “cross-border compatibility,” a Binance representative said.
The MiCA framework governing crypto asset service providers is set to come into full force on December 30. Some of Europe’s largest financial institutions are already preparing to launch their digital asset offerings.
(MiCA) will impact stablecoins based on the implementation method.
Although MiCA defines decentralized digital assets as outside its scope, some DeFi protocols include centralized intermediaries, which may make this framework relevant in those cases.
However, Binance’s reports on global stablecoin regulation, shared with Cointelegraph, suggest that strict enforcement could pose additional challenges for stablecoin providers, stating:
“A strict interpretation of the legislation could require DeFi protocols to adhere to the same licensing and know-your-customer (KYC) requirements as traditional financial services firms. These burdens could pose a significant challenge, with many DeFi protocols finding it difficult or unwilling to comply.”
In an attempt to create more stability, the MiCA will ban the issuance of algorithmic stablecoins in the EU, in order to avoid another collapse, like the UST collapse in May 2022.
Will MiCA convert cryptocurrencies into fiat currencies?
Although MiCA is generally viewed as positive for regulating stablecoins, it raises concerns about clustering, especially among smaller cryptocurrency companies.
The new law could turn the Web 3.0 industry into a traditional finance (TradFi), as it will become more difficult for companies with limited funds to expand, according to Anastasia Plotnikova, CEO and co-founder of Fideum, a regulatory infrastructure and blockchain firm. Plotnikova told Cointelegraph:
“Cryptocurrencies will become like traditional finance. The more money you have, the more assets you have under management, and the easier it is to scale.”
That could mean more pressure on smaller companies with limited funds, she added:
“It would be exploitation, as venture capital practices and big crypto companies would simply buy up talent.
Some of the largest banks are currently preparing to adjust their digital asset offerings in preparation for MiCA implementation. Société Générale, the world’s 19th largest banking group by assets, has partnered with Bitpanda to launch a MiCA-compatible stablecoin, the euro-denominated EUR CoinVertible (EURCV).
