The European Commission today published a wide ranging review of its crypto-asset regulation MiCA in the form of two consultations, one for the general public and a separate, more technical targeted consultation. Responses are due by 30 August.
While the review covers the full scope of MiCA, the stablecoin sections stand out for their depth and ambition and are the focus of this piece, although some other notable points are highlighted later. In particular, multi-issuance global stablecoins get significant treatment, a topic that the ECB and European legislators have been circling for some time. Their concern is straightforward: even if reserves for EU holders are ringfenced, local reserves could be drained during a crisis as holders in other jurisdictions rush to redeem.
Much of the consultation reads as a response to legislative developments elsewhere. The ongoing US debate on stablecoin interest and rewards prompts a question on whether the EU’s blanket interest ban should be amended. The UK’s discussion of requiring systemic stablecoin issuers to hold a proportion of reserves at the central bank, and potentially to access the central bank as lender of last resort, finds a direct parallel. The UK and US also require banks to issue stablecoins through separate subsidiaries, whereas MiCA allows banks to offer stablecoins without reserve segregation. The consultation asks whether it should follow suit. We’d observe that several EU bank-linked issuers have already chosen separate entities voluntarily.
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