TL;DR
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The EU opened a formal review of MiCA, its crypto rulebook. It was always planned, but the timing matters.
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The big question: whether to lift the ban on stablecoin holders earning interest.
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Euro stablecoins keep losing ground to dollar ones, and not one non-currency-backed token has been licensed yet.
Yesterday, the European Union opened a formal review of the Markets in Crypto-Assets (MiCA) framework. When launched, MiCA was the first, comprehensive crypto markets regulation framework of its kind. While this was always planned as part of the framework itself, it does come at a time when a lot is happening, and especially with regards to stablecoins.
The Stablecoin Gap, in Silver and Gold
Euro pegged stablecoins are the silver of the ecosystem, USD pegged ones are the gold. And the Euro ones are continually losing ground. With the CLARITY Act coming, this rift could get even wider. MiCA bans stablecoin holders from earning any interest, this point is sure to be discussed.
And the proof is in the pudding. Since the introduction of MiCA, not a single stablecoin backed by something other than currency has yet been licensed in Europe. Even though there’s a legal way to do it through the framework.
Additionally, since the CLARITY Act would regulate a wider scope of the crypto sphere, such as DeFi, there’s a good chance that European legislators will want to add these components to keep a somewhat competitive regulatory landscape.
France Against Itself
France has been vocal about wanting the gap between Euro and Dollar pegged stablecoins closed. But they do not want it by allowing interest. Instead, Roland Lescure, French finance minister, has backed Qivalis, a plan where major European banks lead the building. Meanwhile, France’s central bank is wary of stablecoins, saying it could lead to stablecoinisation or dollarisation of the system. They want the rules tightened.
The industry, while they obviously want loosening of the rules, aren’t asking the EU to gut it completely. Katie Harries, head of policy at Coinbase in Europe said:
We support targeted improvements to ensure Europe can combine its strong safeguards with global competitiveness, not a reopening of first principles.
So, the MiCA framework is getting a review. The review is a feature of the framework itself but it does come at an opportune time. Euro pegged stablecoins are falling way behind their Dollar counterparts and with the CLARITY Act coming soon, the European framework will need revising for the region to stay competitive in crypto.
The EU built the first comprehensive regulatory framework for crypto, now it’s up the the union to make it competitive again.
