The introduction of Markets in Crypto Assets (MiCA) has sparked both excitement and concern within the cryptocurrency community. While the regulation aims to provide a clear framework for the operation of crypto assets, there is one aspect that many believe could hinder the adoption of cryptocurrencies, which is the transaction cap on stablecoins.
Stablecoins have gained popularity in recent years due to their ability to maintain a stable value, often pegged to a fiat currency like the US dollar.
This stability makes them a convenient means of exchange and a reliable store of value. However, MiCA’s decision to impose a 200 million euro ($219 million) cap on daily transactions for private stablecoins like Tether (USDT) and Circle’s USD Coin (USDC), could dampen their potential and restrict their utility.
Regulators Should Look Into the Daily Limits for Stablecoins
In a recent interview, Chander Agnihotri and Rachel Cropper-Mawer, the legal director and partner at global law firm Clyde and Co, said regulators should look into the daily limits and do something about it. Rachel also mentioned that the transaction cap is not tantamount to a ban and that if the threshold is passed, issuers will have to cease further issuing activities and work directly with regulators to bring transactions under the cap.
The transaction cap essentially limits the number of stablecoin transactions that can be conducted within a specific period. Also, the restriction aims to prevent market manipulation and protect consumers, but it also poses challenges for businesses and individuals looking to utilize stablecoins for daily transactions. By impeding the free flow of the coins, MiCA inadvertently curtails their adoption, hindering the growth and development of the cryptocurrency industry as a whole.
Notably, one of the key benefits of stablecoins is their ability to facilitate fast and low-cost transactions. With the transaction cap in place, these advantages may be significantly diminished. Businesses relying on stablecoins for cross-border payments, for instance, may find themselves limited in the volume of transactions they can process efficiently.
However, it is important to acknowledge that MiCA’s decision to implement a transaction cap on stablecoins is not solely rooted in hindering adoption. Nevertheless, it is crucial for policymakers and regulators to consider the potential unintended consequences of such limitations. While the goal is to protect consumers, it is equally important to foster an environment that encourages innovation, consumer protection, and industry development.
