30s Summary

The world’s largest crypto exchange, Binance, anticipates significant changes to global stablecoin regulation following Europe’s introduction of the Markets in Crypto-Assets Regulation (MiCA) bill. This legislation, set to launch on 30 December, provides the first comprehensive regulatory framework for crypto-assets, potentially lending more credibility to the industry. The MiCA rules are expected to stabilise the market, protect consumers, and encourage innovation by providing clear regulations for issuing, managing reserves and redemptions. However, the MiCA could create challenges for stablecoin providers, especially smaller firms, as its guidelines resemble traditional finance regulations, potentially hindering growth for firms with limited funds.

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Binance, the biggest cryptocurrency exchange in the world, states that the regulation of global stablecoin is about to see some important changes with a new framework coming from Europe. The Markets in Crypto-Assets Regulation (MiCA) bill by the European Union introduces the first all-encompassing set of rules for crypto, a move which could make the whole industry seem more credible to lawmakers around the globe.

According to a spokesperson from Binance, MiCA is going to be a super important part in getting a worldwide regulation for stablecoin. They told Cointelegraph that having solid rules when it comes to issuing, managing reserves, and making redemptions will make the market more stable, provide better protection for consumers, and boost innovative ideas by making the laws more clear.

The comprehensive approach of MiCA is also set to be used as a kind of international standard for other areas that could potentially look to match their own rules with MiCA’s, making it easier to do business across borders, said the Binance rep. This MiCA framework, which will directly affect crypto-asset service providers, is due to start running in full swing on 30 December. Big financial institutions in Europe are already starting to get their digital asset stuff ready.

The impact of MiCA on stablecoins will be influenced by how it’s put into practice. The legislation indicates that fully decentralized digital assets are outside of its control. But, since some decentralized finance (DeFi) protocols involve centralized middlemen, the framework could apply in these cases.

Binance submitted a report to Cointelegraph about global stablecoin regulations, which suggests a strict implementation could put more challenges on stablecoin providers. The report argues that if the law is interpreted in a really tough way, these DeFi rules might have to comply with the same licensing and customer identification regulations that traditional financial firms do. This could create huge challenges that many DeFi rules might find difficult or not want to meet.

To bring about more stability, the EU’s putting MiCA to use will stop the issuance of algorithmic stablecoins to prevent anything like the Terra USD (UST) stablecoin crash that happened in May 2022.

The MiCA bill is generally seen as a good thing for the crypto industry. However, it might cause problems for smaller firms. It makes the Web3 industry more like traditional finance (TradFi), making it harder for firms with limited funds to grow, according to Anastasija Plotnikova, the boss and co-founder of Fideum, a regulatory and blockchain infrastructure firm.

Plotnikova told Cointelegraph that “The more money you have in crypto, the more assets you’re managing, the easier you can grow. It’s becoming just like a TradFi.” This could result in more burdens for smaller firms with limited funds. Some of the largest banks are already prepping their digital asset offerings ready for when MiCA kicks in.

The 19th-largest banking group in the world by assets, Societe Generale, has teamed up with Bitpanda to introduce a MiCA-compliant stablecoin, the EUR CoinVertible (EURCV).

Source: Cointelegraph