Global stablecoin regulation will take a crucial step forward with Europe’s upcoming regulatory framework, according to Binance, the world’s largest cryptocurrency exchange.
The European Union’s Markets in Crypto-Assets Regulation (MiCA) bill is the first comprehensive regulatory framework for crypto, which could legitimize the industry for lawmakers globally.
MiCA will be a “critical element” for the development of a comprehensive, global stablecoin regulation, according to a Binance spokesperson, who told Cointelegraph:
“By setting clear rules on issuance, reserve management, and redemption, MiCA enhances market stability and consumer protection, while also fostering innovation through legal certainty.”
MiCA’s comprehensive approach will serve as a “global benchmark” for other jurisdictions that may look to align their own frameworks with MiCA for more “cross-border compatibility,” added the Binance representative.
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The MiCA framework, which impacts crypto-asset service providers, is set to go into full effect on Dec. 30. Some large European financial institutions are already preparing their digital asset offerings.
MiCA’s effect on stablecoins will depend on implementation
While MiCA specifies that fully decentralized digital assets are outside its scope, some decentralized finance (DeFi) protocols include centralized intermediaries, which could make the framework relevant in those cases.
However, a Binance report on global stablecoin regulations shared with Cointelegraph suggests that a strict implementation could impose additional difficulties for stablecoin providers.
The report stated:
“A strict interpretation of the legislation could require that these DeFi protocols comply with the same licensing and Know Your Customer (KYC) requirements as traditional financial services firms. This could impose significant burdens that many DeFi protocols may find challenging or be unwilling to meet.”
Overview of Global Stablecoin Regulation. Source: Binance
In an effort to create more stability, the EU’s MiCA implementation will prohibit the issuance of algorithmic stablecoins to avoid another collapse like that of the Terra USD (UST) stablecoin in May 2022.
Is MiCA making crypto “just like TradFi?”
While the MiCA bill is seen as a net positive for the crypto industry, it also introduces consolidation concerns for smaller firms.
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The bill is making the Web3 industry more akin to traditional finance (TradFi), as it will make it more difficult for firms with limited funds to scale, according to Anastasija Plotnikova, CEO and co-founder of Fideum, a regulatory and blockchain infrastructure firm.
Plotnikova told Cointelegraph:
“Crypto is becoming just like a TradFi. The more money you have, the more assets under management, the easier it is to scale.”
This could mean more pressure for smaller firms with limited funds, she added:
“It will be a lot more predatorial, even VC practices or larger crypto companies just buying the talent, buying this off the shelf.”
Some of the largest banks are already preparing their digital asset offering for the implementation of MiCA.
Societe Generale, the world’s 19th-largest banking group by assets, has partnered with Bitpanda to launch a MiCA-compliant stablecoin, the euro-denominated EUR CoinVertible (EURCV).
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