By Alicia Maher
European Union crypto regulations will cut the market share of stablecoins not denominated by the Euro. The regulation will take effect in 2024. Industry reps are saying it has the potential of limiting the EU’s competitiveness.
A New MiCA Deal
The 27 EU ambassadors gave approval on Wednesday to a new MiCA deal. It was sorted back in June along with the European Parliament.
The Parliament is expected to vote on the regulations before they become law. The votes are expected to take place sometime in December or early next year.
The ambassadors equally published the entire deal they approved. It revealed such details that stablecoins not denominated in Euros will have limited transactions. They will be pegged at €200 million or 1 million transactions in the Eurozone.
Groups in the crypto industry wrote a joint letter to address the matter. The groups involved are the Digital Euro Association and Blockchain for Europe. They argued that the three top stablecoins make up 75% of trading volumes.
The letter also said the top three stablecoins already beat the limits of the regulation. The top three stablecoins by market cap are Tether, BUSD, and USDC.
ARK36 crypto hedge fund CEO, Anto Paroian, thinks the limit will affect the EU’s competitiveness. It will also affect the Eurozone’s potential for innovation.
Lesser Utility for Dollar-Linked Stablecoin
A crypto lobbyist group in Brussels, European Crypto Initiative, said the regulation might be burdensome. But a favorable approach to stablecoins denominated in Euros might come up, it said. It would follow fears of financial stability in the zone.
Stablecoins are a class of cryptos that are designed to stick to a particular value. They are usually pegged on a 1:1 basis with any fiat money.
Moody’s Investors Services’ Head of Digital Assets, Fabian Astic, shared his view. He said if the document retains its content, it will restrict the utility of Dollar-pegged stablecoins. The USDC, tether, and BUSD will have lesser use, especially in the Eurozone.
A member of the EU Parliament, Stefan Berger, spoke with Reuters on the deal. He said it could increase stablecoins pegged to the Euro and it is welcome. Berger was instrumental in negotiating the deal.
Tether USD is the largest cryptocurrency in the world. It has a total market capitalization of $68 billion. This compares with its version pegged to the Euro with a market capitalization of $202 million.