The European Union is set to implement the Markets in Crypto Assets (MiCA) legislative framework, which will require issuers of stablecoins to obtain a license and hold sufficient reserves. The Chairperson of the European Banking Authority (EBA), José Manuel Campa, believes that central banks should have the authority to veto widespread implementation of stablecoins if there is a risk of undermining goals such as financial stability or monetary policy.

The MiCA framework allows central banks to intervene in proposals for the issuance of stablecoins referred to as asset referenced tokens and requires usage of the token to cease if there are more than 1 million daily transactions. However, Campa expressed the opinion that there is a future where stablecoins are frequently used, so long as certain guard rails such as anti-money laundering laws are observed.

Additionally, Campa has expressed agreement with U.S. regulators on the potential danger of using a permissionless blockchain in issuing stablecoins. Stablecoin issuers must follow a regulatory framework that will be overseen by the EBA, which includes a thorough assessment process and enhanced stress testing of resources with the largest issuers. The MiCA regulations are likely to take effect from July 2024, so several major organizations, such as Circle and Unstoppable Finance, have already expressed their intention to issue stablecoins under the aforesaid guidelines.

In conclusion, the MiCA regulations put forth by the EU are geared towards supporting the use of stablecoins but to also ensure that reserve requirements are adequately met and that risks related to the permissionless blockchain technology are kept to a minimum. Although, it remains to be seen whether MiCA will be a successful endeavour, its success may ultimately depend on the practical real world usages of these stablecoins as well as how closely the EBA sticks to its regulatory framework.



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