The Markets in Crypto Assets Regulation (MiCA) is hailed as a pivotal moment in crypto market regulation. However, a significant misunderstanding exists regarding fiat backed stablecoins in Europe and the anticipated changes under MiCA.
Jón Egilsson is a co-founder and the chairman of Monerium. He previously served as vice chair and chairman of the Icelandic Central Bank’s supervisory board from 2013-17.
Contrary to popular belief, MiCA does not introduce entirely new regulations for fiat backed stablecoins. Instead, it confirms that stablecoin issuers must be regulated as electronic money institutions (EMIs).
This confirmation highlights a crucial yet misunderstood fact: many stablecoins currently offered in Europe are illegal because they are not authorized and regulated as electronic money (e-money) under European Union law established over two decades ago.
As outlined in the electronic money directive (EMD), in Europe fiat stablecoins that represents a claim on the issuer already fall under the definition of e-money. First introduced in 2000, e-money is a “technically neutral” digital alternative to cash which is in wide use, including in pre-paid cards and mobile wallets.
MiCA confirms that issuers of fiat stablecoins must comply with the existing EMD. Starting from July 2024, they must also comply with additional requirements spelled out in MiCA. MiCA unambiguously confirms the current law which states only EMIs and credit institutions can legally issue fiat stablecoins in the the multinational European Economic Area trading bloc.
There is a prevailing misunderstanding that unauthorized stablecoins will only become illegal with MiCA. That’s not true, fiat stablecoins which represent a claim on the issuer are already illegal in the EEA unless they are issued by EMIs or credit institutions and fully authorized and regulated under law codifying the EMD.
Failure to obtain the proper license for offering e-money exposes issuers to legal consequences, including fines and potential criminal charges.
Stablecoins offer the promise of enabling secure and efficient transactions and storage of digital cash without the intermediation of traditional financial institutions. The importance of regulatory compliance cannot be overstated. Regulation and supervision serves as a critical bulwark…
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