Stablecoin Adoption is Impeded By the European Union

The Euro Coin from Circle and other digital assets are on the verge of being surpassed by markets within the Crypto-Assets framework. The concept should be examined by policymakers.

Before the Markets in Crypto Assets (MiCA) regulatory framework, which intends to give regulatory clarity on crypto assets, is passed, the landscape of digital assets in the European Union is changing. Despite its good intentions, MiCA’s current structure might prevent innovation. However, if a revised version of this regulation is approved, it might help the European Union take the lead in the field of digital payments. Otherwise, there is a chance that the continent will lag.

In the EU, MiCA aspires to create a legal framework for the crypto-asset sector. Broad strokes are now recognized, but there is still plenty that has to be programmed and defined.

At the same time, financial technology company Circle unveiled Euro Coin, a stablecoin (EUROC). The company’s current USD Coin uses the same complete reserve model as the Euro Coin. This reputable digital US dollar money now has a circulation of over $55 billion and is used on both centralized and decentralized exchanges. As a result, EUROC, which was created for stability, is fully backed by euros that are banked in euros and is redeemable from euros one to one.

Even though these two news stories would appear to be good news for cryptocurrencies in Europe, not everything is as it seems. The MiCA framework sets a daily cap on stablecoin payments of $200 million. This is a very low bar to set for success and will eventually do nothing but discourage innovation and limit the potential of these resources. Get inspiration from Belgium, where from July 1, 2022, all retailers are required to provide at least one digital payment option. But the issue is, according to this clause, stablecoins and cryptocurrencies are not recognized as legitimate digital payment methods.

The restrictions imposed by MiCA limit the potential of EUROC and other digital assets. And if this obstacle is not cleared, the EU might not experience the level of adoption required to drive crypto innovation globally. The potential loss of the euro’s status as a major global reserve currency is another possibility.

Emerging crypto ventures and those already operating in the EU will likely be significantly impacted by MiCA’s hostile or even unduly cautious posture toward digital assets. In reality, Circle has previously stated that until the regulatory framework is clear, it will not actively advertise EUROC in the country.

This is a major opportunity lost for the EU market to set the pace for innovation in digital assets. The framework’s restrictions might completely lessen the EU’s appeal and compel top digital currency enterprises to leave Europe instead of the so-called “innovation-friendly” approach MiCA seeks.

Alternately, accepting and using EUROC – and other comparable stablecoins – as an acceptable form of digital payment from a tried-and-true issuer could offer a method to simplify the payment process, cut expenses, and increase consumer protection. However, adoption is probably going to be constrained if the lawful transaction volume is arbitrarily set at $200 million.

Increasing the availability of euro stablecoins for virtual asset service providers (VASPs) would be a terrific approach to strengthen the sector and better safeguard consumers. In fact, in Europe, when consumers utilize a crypto custodian, crypto assets cannot be confiscated by creditors in the case of bankruptcy, but fiat assets can. They are regarded as “prepayments.” Consequently, the broader availability of euro stablecoins leads to a safer VASP sector.

Overall, MiCA is a definite move in the right direction for the regulation of crypto assets in the EU.