Two executives of Moody’s, a global financial services firm, have shared thoughts on the Markets in Crypto Assets (MiCA) which is a proposed regulation of the European crypto ecosystem by the EU.
In an exclusive interview with The block, the executives noted that if the proposed regulation pulls through, it will open up innovation opportunities for stablecoins.
The MiCA regulation proposal is an initiative of the European Union to regulate the crypto ecosystem in Europe. The proceedings started in September 2020, with the aim of protecting crypto users from cyber threats and facilitating the development of Euro-backed digital assets.
On October 5, the MiCA regulation proposal was approved by an EU council and was sent to the EU parliament for further consideration and approval. The EU parliament sitting, where final decisions on the crypto regulation will be made, will be held on October 10.
The MiCA regulation, if approved, will take full effect in 2024 and will cut down on the patronage of US dollar-backed stablecoins within the European borders. The regulation proposes that non-euro backed stablecoins transactions are to be capped at €200 million per day.
Favoring Euro-Pegged Stablecoins
This MiCA policy, however, is expected to spur innovation for stablecoins that are euro pegged and see the emergence of dynamic web3 developers.
The Head of DeFi and Digital Assets Strategy at Moody’s, Rajeev Bamra said that while a host of dollar-backed stablecoins are engineered and developed by web3 service providers that are not from the banking sector, the existing players in the traditional financial sector will be compliant and will ensure consumer protection in developing the euro backed tokens which will procure the favor of the EU regulators.
The Global Head of DeFi and Digital Assets at Moody’s, Fabian Astic noted that whether or not the European crypto market will flourish and witness the growth of euro-backed stablecoins will be dependent on if the legal framework of the proposed regulations is not stringent and if web3 developers will be swift to embrace the opportunities that developing euro pegged stablecoins brings.
He added that “for now developers may be stifled by uncertainties over legalities or tax efficiency.”
