The European Union’s upcoming crypto law, known as MiCA, is scheduled to come into effect next year and will establish a regulatory framework for stablecoins within the bloc. However, there are still uncertainties surrounding how the law will apply to decentralized and foreign issuers.
The European Banking Authority (EBA) has emphasized that there will be no grace period for coins already in the market, leaving legal gray areas to be resolved. MiCA, finalized in June of the previous year, aims to make the EU the first major jurisdiction with comprehensive crypto regulations, enabling exchanges and wallet providers to operate across the bloc with a single license.
The provisions of MiCA specifically addressing stablecoins, which are cryptoassets tied to other assets like fiat currency or gold, will take effect in June 2024. In the meantime, the EBA and the European Securities and Markets Authority (ESMA) are consulting on the finer details.
Marina Parthuisot, Head of Legal at Binance France, warned that there could be a large-scale delisting of stablecoins in Europe by June 30, 2024, as no projects have been approved yet. This potential delisting could significantly impact the European market compared to the rest of the world.
While Binance’s CEO, Changpeng “CZ” Zhao, has praised the clarity brought by MiCA, regulatory pressure has already led the exchange to withdraw from several European jurisdictions.
Other industry participants are also grappling with the requirement for issuers to be EU-based undertakings, which may exclude innovative governance models favored by blockchain foundations. The issue of decentralization poses practical and challenging questions, as many stablecoin issuers aim to be completely decentralized without a central point of decision-making or issuance.
Foreign issuers may have the option to register through a crypto provider based within the EU, potentially avoiding fragmentation of major international initiatives. However, officials have indicated limited flexibility in implementing the rules, with no transitional arrangements for stablecoin tokens. Elizabeth Noble, Team Leader for MiCA at the EBA, made it clear that the rules will apply from the end of June next year. Isabelle Vaillant, Director of Prudential Regulation and Supervisory Policy at the EBA, acknowledged the practical difficulties surrounding decentralization but emphasized the existence of a contractual link between issuers and customers.