FameEX Hot Topics | Legal experts assert that the transaction cap on MiCA's stablecoin impedes the growth of cryptocurrency adoption

The recent implementation of the Markets in Crypto-Assets (MiCA) legislation within the European Union has prompted discussions about its potential impact on cryptocurrency adoption. One particular aspect of concern is the daily transaction cap of $216 million imposed on stablecoins like USDT and USDC. Critics argue that these caps might impede the use and growth of stablecoins, leading to calls for a revision of the existing framework.

MiCA, which was officially signed into law on May 31, 2023, represents a significant milestone as it is the world's first regulatory guidance specifically tailored to cryptocurrencies. Legal director Chander Agnihotri and partner Rachel Cropper-Mawer from global law firm Clyde and Co express their belief that the current regulations could swiftly stifle the use of large stablecoins. They emphasize the need for regulators to reassess the daily transaction limits in order to ensure a more balanced approach.

The collapse of Terra's algorithmic stablecoin UST in May 2022 and the temporary de-pegging of USDC following the failure of Silicon Valley Bank in early 2023 have amplified regulators' concerns regarding the regulation of private stablecoins. Agnihotri highlights that due to their closer ties to the traditional financial system through the use of reserves, regulators are particularly wary of the potential consequences stemming from the failure of a larger stablecoin. Cropper-Mawer clarifies that the 200 million euro cap does not equate to a ban on stablecoin usage. If this threshold is surpassed, issuers would be required to cease further issuance and collaborate with regulators to bring transactions within the prescribed cap. Nevertheless, she anticipates that certain larger stablecoins might experience limited usage as private stablecoins gain more popularity. She expects lawmakers to revisit this issue in the future to ensure a balanced and adaptable regulatory approach.

Considering the possible dampening effect of the current rules on stablecoin usage, Cropper-Mawer suggests that the accelerated growth of central bank digital currencies (CBDCs) could be a sensible outcome. However, she acknowledges that MiCA legislators are likely aware of the potential negative impacts these regulations could have, especially when compared to the prevalence of private stablecoins in other global markets. Cropper-Mawer warns that allowing relatively unrestricted stablecoin usage in other jurisdictions may have adverse effects on the crypto market within the European Union.

Despite receiving criticism for its comprehensive nature, MiCA has predominantly garnered positive feedback. Agnihotri emphasizes that the legislation improves market access for startups and smaller entities, fostering innovation and competition. While recognizing that adjustments may be necessary, he highlights the overall favorable reception of the legislation. In summary, the introduction of MiCA legislation and the establishment of daily transaction caps on stablecoins have prompted concerns regarding potential obstacles to cryptocurrency adoption. Experts advocate for a reconsideration of the current framework, as they believe it may hinder the use and growth of stablecoins.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.