While stablecoins are covered by the EU’s MiCA crypto regulations, it turns out that “payments” that use stablecoins without involving other cryptos are also subject to the EU’s payments legislation PSD2. This is problematic as it means that MiCA regulated crypto asset service providers (CASPs) that enable mainstream payments for their clients are additionally meant to register as a payment service provider (PSP). That’s a significant undertaking that also involves the company having extra capital in addition to the CASP requirements. One of the objectives of MiCA was to encourage innovation, hence this is not a desirable scenario.
Given this has been an area where the laws are unclear and there are 27 different national regulators, they haven’t all had the same views. So, at the behest of the European Commission, the European Banking Authority (EBA) published an opinion on the topic. The legal reason for these requirements is that electronic money tokens (EMTs) – the EU term for stablecoins – are classified as ‘funds’ under Europe’s PSD2.
Some exchanges might block the use of stablecoins for mainstream payments in order to avoid extra compliance. Alternatively, they might partner with a licensed payment provider, in which case the stablecoin transfers might cost more. The third option is to comply with certain parts of PSD2 legislation and apply for a license.
The EBA’s no action letter provides some relief, but until the law is changed it could dampen the mainstream usage of stablecoins outside the crypto sphere. However, the EBA’s guidance does provide some boundaries on when PSD2 applies.
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