MiCA (Regulation on Cryptoasset Markets) is European Union legislation aimed at regulating the cryptocurrency market within the region, providing a clear and harmonized legal framework for businesses and consumers operating with cryptoassets.
It was designed to increase transparency, security, and consumer protection, promoting innovation within the cryptocurrency sector while ensuring that practices do not jeopardize financial stability.
What does MiCA regulate?
MiCA regulates a wide range of aspects within the crypto world, including:
Cryptoassets: Defines what cryptoassets are, how they should be treated, and who can offer related services, such as exchange platforms, cryptoasset wallets, and issuances of cryptoassets.
Stablecoins: The legislation places a particular focus on stablecoins like USDT (Tether), which are linked to traditional assets like the US dollar. These stablecoins have a direct impact on the financial system due to their high adoption, and MiCA seeks to ensure that their issuance and circulation are carried out under certain backing and control regulations.
Consumer protection: Ensures that investors are informed about the risks associated with the use of cryptoassets and how exchange platforms should be managed to prevent fraud and protect users' funds.
Oversight of companies: Establishes that companies offering services related to cryptoassets must be registered and comply with a series of requirements, which include regular audits, risk management, and the implementation of anti-money laundering measures.
Why is it said that MiCA destroys USDT?
The claim that MiCA 'destroys' USDT stems from the fact that this regulation can affect how stablecoins operate, such as Tether (USDT), which do not always meet the transparency and backing standards required by MiCA.
The reasons include:
Backing and transparency requirements: MiCA requires that stablecoins, like USDT, be fully backed by verifiable and audited assets. USDT has historically been criticized for the lack of transparency regarding whether it actually maintains the 1:1 parity with the US dollar, which could lead to issues if stricter rules are implemented on how reserves must be maintained.
Limitations on the issuance of stablecoins: According to MiCA, stablecoins that are not 'large' in terms of trading volume may face additional restrictions or regulations that limit their ability to operate freely in the market. Tether (USDT), with its large volume, could be affected if it cannot demonstrate that its assets are properly backed or comply with other imposed regulations.
Asset reserve requirements: MiCA requires that the companies behind stablecoins maintain adequate reserves in liquid assets, which could be a challenge for some stablecoins like USDT, which has faced criticism regarding the quality of its reserves.
In summary, MiCA does not directly destroy USDT, but establishes requirements that make its large-scale operation difficult if it does not comply with the new rules, especially regarding the transparency and backing of its reserves.
* The implementation of these regulations could lead to stablecoins that bureaucrats consider less transparent, such as USDT, losing their competitive advantage compared to other stablecoins that comply with the new European Union regulations.
(That is, the only thing they allow to have no transparency at all are Fiat currencies) *