EU MiCA Regulation Sets Global Standard for Stablecoin Compliance

The European Union’s Markets in Crypto-Assets Regulation (MiCA) is expected to significantly change the “regulation of stablecoins” worldwide.

It seeks to establish an international standard for countries to follow, aligning their regulatory regimes and promoting “collaboration and cross-border compatibility.”

Regulation of Stablecoins Under MiCA

As per the Binance statement, the detailed framework will establish guidelines for the “issuance, reserve management, and redemption” of stablecoins. The updated framework will increase stability in the market and will protect consumer funds as well.

Guidelines from MiCA will serve as a baseline for other countries, assisting them to align their regulatory efforts to combat financial crimes and promote harmony among nations.

Impact on Smaller Firms and DeFi Protocols

Even though MiCA is considered to bring clarity to the crypto industry, its strict guidelines and procedures might be challenging for “smaller crypto firms and decentralized finance (DeFi) protocols.”

The new AML legislation will require smaller businesses to comply with the same “Know Your Customer (KYC) and licensing requirements” as traditional financial services, adding a compliance burden due to limited resources.

Read Also:

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• UK FCA Rejects 90% of Crypto Firms for AML Compliance Failures

Ban on Algorithmic Stablecoins

Updated AML guidelines of MiCA introduce “banning on algorithmic stablecoins” like “Terra USD (UST)” to prevent financial instability caused by the collapse of digital currencies in the market.

Financial Institutions Preparing for MiCA

From 30 December onward, the implementation of new rules by MiCA will be necessary for all the stable coin issuers operating within the Europen Union. Prominent financial institutions are already ready to comply with these rules.

“Societe Generale” is creating digital currencies that comply with MiCA’s framework. It is collaborating with “Bitpamda” to introduce “EUR CoinVertible stablecoin” in the market.