Understanding the EU Commission’s Position on Stablecoins: A Breakdown
Welcome to a regulatory maze...
The European crypto community has been abuzz with discussions regarding the European Commission and ESMA's joint statement on stablecoins under MiCA. The clarity (or rather lack thereof) around the status of stablecoins like USDT has sparked debates, particularly concerning how Crypto-Asset Service Providers (CASPs) can engage with them.
Jonathan Galea's (@ImpermanentGain) recent thread highlights critical insights into the statement, shedding light on what is permitted and what remains a grey area. Let’s dig into it…..
CASPs Can Retain Stablecoins Like USDT, But Not on Trading Platforms
Galea's thread begins with the highly memetic:
“Roses are red, Violets are blue, CASPs can retain stablecoins like USDT, But not trading platforms too.”
Essentially, the EU’s position suggests that while CASPs can still offer services related to stablecoins (EMTs and ARTs), there are restrictions when it comes to promoting them or listing them on trading platforms.
CASPs (Except Trading Platforms) Can Service EMTs and ARTs
According to the statement, CASPs that do not operate trading platforms can continue offering services related to all EMTs and ARTs even if they are not MiCA-compliant; provided they do not promote or advertise these tokens. This means that OTC desks, brokerages, and portfolio management services can still handle stablecoins without running afoul of MiCA’s restrictions.
The Issue of “Admission to Trading”
A contentious aspect remains whether trading platforms can admit stablecoins for trading. Galea argues that trading platforms should be able to self-admit EMTs and ARTs that do not breach MiCA rules. But apparently, this remains a point of legal interpretation lol.
The EU seems to believe that “admission to trading” only applies to CASPs operating trading platforms. This creates a scenario in which stablecoins can still be integrated into the EU crypto ecosystem without explicit trading platform listings.
Stablecoins and Liquidity in the European Market
Stablecoins like USDT, PayPal’s PYUSD, and First Digital’s FDUSD remain crucial for liquidity. Even under the current regulatory framework, non-trading platform CASPs can continue to facilitate transactions involving these stablecoins, which ensures that liquidity remains available within the European market.
For trading platforms worried about liquidity without direct stablecoin listings, Galea suggests that engagement with non-trading CASPs could provide a viable workaround. By routing liquidity through OTC desks or similar services, they can still maintain stablecoin access indirectly.
Despite initial fears that stablecoins might face an outright ban under MiCA, the latest EU joint statement clarifies that CASPs can still operate with them under specific conditions. They couldn’t have been more ambiguous. Creative solutions are already emerging to ensure continued liquidity. The fight for clear and fair stablecoin regulations in the EU is far from over.
I love stablecoins, Tether in particular, and I will be writing about the ongoing and ever-increasing future stablecoin war. Stay tuned for insights, drama, and analysis as it all unfolds.
P.S. In case you didn’t realize, I am not Patrick Hansen