Blockchain for Europe and the Digital Euro Association have asked the Council of Europe to review the provisions of the law restricting the issuance and use of dollar-pegged crypto assets.
According to representatives of the associations, the adoption of the law on the markets of cryptoassets (MiCA) in the current version may in fact ban the stablecoins USDT, USDC and BUSD:
“USD-pegged stablecoins USDT, USDC and BUSD account for almost 75% of crypto trading volumes worldwide. Limiting their use in the eurozone from 2024 will not only lead to the stagnation of crypto markets, but may also lead to destabilizing consequences and a significant outflow of crypto assets outside the EU.”
The letter notes that EU crypto investors are very likely to face extremely pronounced short-term price volatility caused by the effect of a change in location. In the medium to long term, fragmented liquidity will make trading more expensive, reduce competition, and slow down innovation:
“Despite the performance of EUR-denominated stablecoins, they account for an extremely small share of trading volume. It is unrealistic to expect them to replace USD-pegged stablecoins in crypto trading, let alone do so seamlessly by January 2024.”
To avoid negative consequences, Blockchain for Europe and the Digital Euro Association are proposing to clarify the concept of “using crypto assets as a medium of exchange” under the MiCA law in order to protect the role of dollar-pegged stablecoins for crypto trading and liquidity of DeFi pools.
As a reminder, members of the European Parliament have reached a preliminary agreement on the provisions of the Crypto Asset Markets Act (MiCA). In accordance with the agreement, EU lawmakers propose to limit the issuance and use of digital assets that are not denominated in the official currency of one of the 27 EU member states from 2024. Also, the proposal includes plans to impose restrictions on stablecoins used as a medium of exchange and trade.
Source: Bits
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