How will MiCA impact EU’s stablecoin market?
Markets in crypto-assets (MiCA) intents to develop and promote the uptake of transformative technologies in the financial sector, including the uptake of distributed ledger technology (DLT). Crypto-assets are one of the main applications of distributed ledger technology and when used as a means of payment, crypto-assets can present opportunities in terms of cheaper, faster and more effective payments, in particular on a cross-border basis, by limiting the number of intermediaries.
Those words where all from the MiCA itself in its preamble. It is a framework intent to give consumer protection on crypto-assets and regulatory clarity on such crypto assets in EU as well as the EEA. Its practical implications are many: Authorization required to be a crypto-asset issuer, investor protection such as risk disclosures, market integrity such as avoiding conflicts of interests, and supervision by the European Securities and Markets Authority (ESMA) as well as national competent authorities in the individual member states.
The assets covered in MiCA are Asset-referenced tokens (including stablecoins backed by a commodity), E-money tokens (stablecoins backed by a single fiat currency) and other tokens such as utility tokens. MiCA will only apply to NFTs (non-fungible tokens) if the NFT has characteristics that make it similar to one of the assets that MiCA applies to. Fiat backed stablecoins requires a reserve ratio of 1:1. Algorithmic stablecoins have to comply with the other tokens framework in MiCA and in effect is not permissible under MiCA in current implementations as they will have to comply with the reserve of assets requirements in MiCA.
Norwegian Block Exchange (NBX.COM) is a Norwegian based cryptocurrency exchange with both an E-money license and a Virtual Currency Service Provider (VASP) registration with the Financial Supervisory Authority (FSA) with cross-border rights of E-money services in the EU and EEA. We have joined forces with Moneta (formerly Mehen) to be the EU issuer of a US dollar stablecoin USDM on the Cardano Blockchain and in accordance with the MiCA framework when it will be applicable to Norway.
USDM is a Cardano Native Token with a minimal environmental impact (1 million transaction has an estimated impact of 168 kWh) and will have a public whitepaper for the EU disclosing risks and stating the conditions of usage of the stablecoin as well as rights and obligations. On the Cardano blockchain the ledger itself tracks USDM movements and you get the same security characteristics as the blockchain itself.
From Norwegian Block Exchange perspective we see MiCA as a potential gamechanger in Europe in terms of legal clarity and more importantly consumer protection. We believe it is our responsibility to disclose the risks we identified and make our consumers aware of them and we think it will help serious actors have a level playing field going forward.
