How EU’s New Crypto Rules Impact Stablecoins and Crypto Firms?

The EU’s new cryptocurrency rules, known as MiCA, are set to kick in by the end of the year. However, several countries are still lagging in adapting their local laws to meet these regulations. However, the concern is much bigger the forced deadline can disrupt the global crypto markets most specifically targeting Stablecoins. We bring you the inside scoop on these regulation tactics that might impact the smooth functioning of crypto assets. Let’s hop in. 

Countries Struggling to Meet the Deadline

As of now, countries like Belgium, Italy, Poland, Portugal, Luxembourg, and Romania have not yet aligned their national laws with MiCA. This means crypto businesses in these countries are at risk of not being able to meet the December deadline, which could delay the full implementation of the new EU-wide regulations.

To be precise, in Poland, the law is stuck in committee, and in Portugal, the government is still deciding how to divide responsibilities between regulators. Belgium is also waiting for political decisions, and in Ireland, the Central Bank has started working with applicants but warns the process will take time. Other countries like Malta, Italy, Cyprus, and Lithuania are facing similar issues, with Malta needing to update its crypto laws to fit the new rules.

What MiCA Means for Crypto Firms

With this MiCA wants to create a unified set of rules for crypto service providers like exchanges, custodians, and wallet providers across Europe. To stay in business, firms need to apply for licenses from national regulators. But with the deadline fast approaching, some national authorities are struggling to process all the applications in time. 

It will be done in two phases, The first, happened in June when stablecoin issuers had to obtain the right authorization. The second phase, with a December deadline, focuses on crypto service providers like exchanges and wallet providers.

However, the crypto industry groups are calling for a delay, arguing that the short time frame between October’s finalization of the technical standards and the December deadline is too tight. These groups suggest extending the deadline by six months to avoid overwhelming regulators and potentially causing business disruptions.

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What Happens Next?

The European Securities and Markets Authority (ESMA) will meet on December 11 to discuss the situation. There may be updated guidance on the timeline, but no official delay has been confirmed yet. If things don’t change, some firms may be forced to pause their operations in the EU. For everyday users, the impact will likely be minimal, but regulatory compliance is part of the growing pains for the crypto space.

A Big Threat to Stablecoins? 

The European Union’s stance on stablecoins, especially under the MiCA regulations, has raised concerns. The regulations limit the volume of stablecoins, mainly to prevent them from competing with the Euro, as many stablecoins are pegged to the USD. Starting in December, stablecoin issuers will need an e-money license in at least one EU country, which could be a challenge for smaller issuers, though larger companies like Circle are already meeting these requirements. This could set a precedent for more regulations on other tokens seen as insufficiently decentralized.