What is MiCA actually for?
I'M sure most people are aware that MICA is now a thing in Europe and has been hailed by the authorities as a wonderful adjunct to their quiver of regulatory arrows.
In case you need reminding it stands for Markets in Crypto Assets. Loads of people have simply ignored this attempt to force stablecoins in particular to keep their money in BANKS as opposed to something NOT subject to authoritarian dictat.
Before we start, I’m indebted to Anton Golub for most of what follows. They say imitation is the sincerest form of flattery and I wouldn’t disagree.
So no lesser a luminary than the Tether CEO (Paolo Ardoino) has made clear that stablecoins are NOT for everyday payments or buying coffee. They are for professional traders and investors to move MILLIONS around. They exist because banks are too slow to deal with crypto’s lightning speed movements.
MICA regulators basically have no idea how stablecoins work. They want stablecoins to rely on fragile banking systems. Their 60% rule (as in you have to keep 60% in cash in a European bank) is destroying Circle.
Remember Silicon Valley Bank? USDC had $3b with them (basically forced on them because of USDC’s banking connections) and when it all went south USDC crashed to 80 cents on the dollar.
Tether on the other hand keeps most of its reserves in US Treasuries - the most liquid and safest store of value there is (and I’m not arguing about it, I’m stating a fact). At the time of the USDC crash, Tether handled withdrawals of more than $17 billion within little more 24 hours without missing a beat and without any significant change from $1 = USDT1.
Europe’s entire stablecoin market is around $250 million as opposed to just Tether’s alone $120billion plus capitalisation.
Why would Tether bother about Europe? Answer: They don’t. Tether will NEVER operate under MiCA rules. It doesn’t need MiCA. MiCA needs Tether.
Europe is effectively cutting itself off from global liquidity, and if the UK follows suit we will be doing ourselves genuine harm for the future. And by the way, USDC can only process EUR200 million a day before they hit MICA’s regulatory buffers. EUR200 million? It’s what Blackrock spends on coffee.
Stablecoins don’t need retail. That’s what the legacy banking system is for. Stablecoins are for the financial behemoths to make their lives even easier. The US gets this and the likes of Blackrock are fast making hay with existing set-ups, as well as tokenising assets in the real world. Europe is turning itself into an irrelevance in the modern, crypto world, I regret to say.
Just as an aside, Europe has allowed USDC to remain authorised. Why? Because the MiCA people thought it would be a good idea to get all that lovely stablecoin cash deposited into European banks to bolster Europe’s problems. So now we have USDC Europe and USDC America. I’d be willing to bet USDC Europe will continue to contract until such time as it ditches Europe.
So what MiCA has actually done is stifle both innovation and business in general. If ever there was an example not to follow, it is the EU’s attempts at crypto regulation.
The announcements are made with huge gravitas and enormous ponderousness and amount to buttons in the scheme of things. They operate on the basis that “we know best” and try to dictate from the centre, a system which has failed at every turn.
America on the other hand allows economics to dictate. It’s not difficult to see the difference.
So the next time someone asks you to put money into a bank account to send to somebody just shake your head. You can do it with stablecoins at effectively no discount (unlike sending cash) for a fraction of the cost and a fraction of the time.
If you ever wonder why America is doing rather better than Europe you only have to look at the way they treat crypto. And that was before President Trump got his way.
