In a letter to the Council of the European Union, two European associations are concerned about the EU’s restrictions on stablecoins.
The cryptocurrency industry has not had the last word on Europe’s proposed regulations of the sector.
In a letter to the Council of the European Union, Blockchain for Europe and Digital Euro Association expressed concern about the survival of dollar-backed stablecoins on the European continent after the entry into force of the MiCa regulation.
As a reminder, a stablecoin (or stable cryptocurrency) is a crypto-asset (or digital asset) that is tied to a fiat currency such as the euro or the dollar. A stablecoin can also be backed by other assets (such as gold). This is called the foundation of stable money.
Risk of ban in the EU from 2024.
Blockchain For Europe shared the letter on Twitter this Friday:
“The three largest stablecoins by trading volume are at risk of being banned in the EU from 2024, due to quantitative restrictions on the issuance and use of EMTs (electronic money tokens) denominated in foreign currencies under MiCA,” the associations write. .
The letter refers to Tether’s usdt, Circle’s usdc and Binance’s busd which today account for “almost 75%” of stablecoin trading volume. The Mica regulation proposes a daily exchange limit for stablecoins of 200 million euros and 1,000,000 transactions. However, for comparison, according to the website Coinmarketcap, the daily trading volume of usdt has reached more than 52 billion dollars. This volume is $5 billion traded for usdc and slightly less than $5 billion for busd.
“Flight of activities outside the EU”
Such restrictions on the exchange of stablecoins could affect the market with “potentially destabilizing effects and a significant leakage of cryptocurrency activity outside the EU,” the letter pointed out.
We remind you that at the beginning of July, the European Parliament and the Council reached a provisional agreement on the MiCa regulation (see our article on this topic). However, the crypto crashes in May and June showed the weaknesses of certain stablecoins, especially the terra usd (ust) Terra blockchain stablecoin.
The Mica Regulation thus wanted to go further within the framework of stablecoins, obliging stablecoin issuers to “create a sufficiently liquid reserve, with a ratio of 1/1 and partly in the form of deposits”.
“Each holder of the so-called ‘stablecoin’ will be able to buy it from the issuer at any time and free of charge, and the rules governing the operation of reserves will also ensure adequate minimum liquidity,” the announcement states. .
Similarly, and while the American company Circle announced its European stablecoin, EuroCoin, The MiCa Regulation aims to limit the issuance of certain stablecoins on European territory.
“The development of non-EU currency-based stablecoins (ARTs) used as a means of payment will be limited in order to preserve our monetary sovereignty. Publicly ARTs, issuers of this type of token will have to be based within the EU “.
Consider another definition of stablecoins
While the MiCa text is still under negotiation in Brussels with a view to its entry into force in 2024, the two associations called on the EU Council to consider another definition of stablecoins.
In particular, they suggest that the concept used to define stablecoins, specifically the mention of a “medium of exchange,” be “clarified or interpreted in such a way as to recognize the role of stablecoins in exchanges and decentralized finance” (DeFi).
“The aim would be to clarify that restrictions on the issuance and use of EMT as a medium of exchange preclude inbound and outbound transactions of unbacked crypto-assets using stablecoins, particularly on exchanges and in DeFi pools,” the letter said.
