Lawyers Explain MiCA Stablecoin Transaction Cap Stifles Cryptocurrency Adoption

The European Union signed the MiCA into law, setting the pace for establishing the world's foremost regulatory guidance on the crypto market.

The $216 million cap to be enforced on stablecoins like USDC and USDT could suffocate them under the MiCA if it doesn't change.

Tether's CTO commented on the situation, stating that the EU would need to revise the frameworks before implementing the guidelines on private firms.

The European Union's MiCA Legislation Imposed on the Stablecoin Market to Stifle Crypto Adoption

The European Union MiCA regulatory framework was signed into law on May 31. It emerged as the world's first regulatory guide on digital assets (cryptocurrencies and stablecoins) to come into effect.

The legislation met an optimistic response from the majority of participants in the crypto industry. However, a major controversial measure introduced by the law is 200 million-euro (or $219 million) cap on day-to-day transactions for privatized stablecoins like Circle's USD Coin (USDC) and Tether (USDT).

In an interview with sources, Rachel Cropper-Mawer and Chander Agnihotri, the partner and legal director at Clyde and Co, commented on the situation.

They informed that the use of renowned stablecoins could rapidly become limited and that regulatory authorities should consider revisiting the daily transaction limits.However, Agnihotri explained that regulators have the right to narrow the regulation of private stablecoins.

The rationale was due to Terra's algorithmic stablecoin TerraUSD (UST) crash last May and the short-term de-pegging of USDC after Silicon Valley Bank collapsed at the beginning of 2023.

Meanwhile, Cropper-Mawer noted that the 200-million-euro cap doesn't imply a ban on the industry. Moreover, if the threshold is exceeded, issuers must terminate their issuing activities and comply with regulatory watchdogs to curtail their daily transactions.

Cropper-Mawer also stated that the growing fame and adoption of private stablecoins would be rapidly stifled, especially for larger stablecoins. Therefore, the issue will be revisited by regulators.

However, she noted that the success of MiCA will depend largely upon how it's enforced at a member-state level and whether lawmakers will continue to keep it under review, especially when considering the speed at which innovation occurs in the crypto industry.

A stablecoin is a digital currency whose value is directly pegged to that of a fiat currency, for instance, the United States dollar, assets such as gold, and other crypto assets.

The concept of stablecoins emerged as a solution to major cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) price volatility. Because of the uncertainty in the crypto space, many stablecoins have at one point depegged from their fiat peg, causing panic in the market and increasing scrutiny on their reserves.

Tether Reacts to MiCA Regulation

Meanwhile, Tether's Chief Technological Officer (CTO), Paolo Ardoino, also weighed in.Ardoino explained to Cointelegraph that there would be a great need to continue discussing the possible revision of the guideline before they are enforced on private stablecoin providers.He emphasized that this will be required for further clarity to the market over specific provisions.

While acknowledging the impact of the daily cap on the stablecoin, the CTO said the legislation notes that these limits apply when the stablecoin is used for certain purposes.

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