Regulation
Italy steps up crypto monitoring in line with MiCA
Italy is preparing to strengthen its oversight of cryptocurrency markets as part of its accession to the European Union’s Regulatory Framework for Crypto-Asset Markets (MiCA).
This regulatory measure, initially adopted in 2022, aims to provide stricter oversight of digital asset markets, targeting insider trading and market manipulation.
Challenges for Blockchain Businesses and DeFi Protocols
The new decree provides for fines ranging from 5,000 to 5 million euros ($5,400 to $5.4 million) depending on the severity of the violations. This step is part of a broader effort to ensure compliance and maintain market integrity.
THE MiCA’s regulatory framework poses significant challenges for blockchain companies and decentralized finance (DeFi) protocols. These protocols must choose between completely decentralizing their networks or adhering to the framework’s anti-money laundering (AML) and Know Your Customer (KYC) regulations.
MiCA regulatory framework. Source: European Union
Fully decentralized networks are exempt from MiCA’s reporting requirements. However, many DeFi protocols use foundations and intermediaries to moderate their communities, risking not meeting MiCA’s definition of decentralization.
As a result, these protocols face the dilemma between full decentralization or requiring users to submit verification data, a difficult decision for many participants.
Adjustments by centralized exchanges in response to MiCA
In response to MiCA, centralized exchanges like Binance has started to adapt its operations. Binance recently informed its European customers of a move towards a model that classifies stablecoins as permissible or unauthorized, in accordance with MiCA requirements.
The exchange plans to gradually transition users to this new system. Binance CEO Richard Teng emphasized that the company is not removing these stablecoins from spot markets, but is limiting their availability for certain products for European users.
Likewise, Uphold made changes to comply with EU regulatory changes, announcing the delisting of six stablecoins: Tether (USDT), Frax Protocol (FRAX), Pax Dollar (USDP), Dai (DAI), TrueUSD (TUSD) and Gemini. Dollar (GUSD).
Despite growing regulatory pressure in Europe, experts remain optimistic about the future of stablecoins. Many believe that stablecoins could potentially alleviate debt crises caused by the overprinting of fiat currencies.
Former Speaker of the US House of Representatives Paul Ryan recently argued that stablecoins could help alleviate economic deficits linked to the debt-laden US dollar.
The promising future of stablecoins
Jeremy Allaire, CEO of stablecoin issuer Circle, echoed this sentiment. He predicted that stablecoins would account for 10% of the money supply over the next decade.
Allaire pointed out that many of the world’s largest payment companies are already using this technology and are exploring ways to expand their use. He highlighted that the benefits of public blockchains and stablecoins are becoming more and more evident.
Allaire estimates that the potential size of the stablecoin market is in the “billions” and that deploying digital dollars on blockchains can deliver on the promises of financial inclusion, reduce remittance costs and enable seamless cross-border trade.
He predicts that cryptocurrency adoption could reach billions of users across millions of apps over the next ten years. During this period, more commercial and financial transactions could be executed via smart contracts on public blockchain infrastructure.
Allaire also suggested that some blockchain organizations could outperform multinational corporations in this time frame, although he did not provide specific details on how and in which sectors this would happen.
Within the framework established by MiCA, this forward-looking perspective highlights the transformative potential of stablecoins and blockchain technology in the global financial system.