LONDON - European Union rules to regulate crypto assets will curb the market share of non-euro denominated stablecoins from 2024, potentially limiting EU competitiveness, industry representatives have said.
Ambassadors for the 27 EU states on Wednesday gave their approval to a deal on the new Markets in Crypto Assets Regulation (MiCA) thrashed out in June with the European Parliament.
To become law, the Parliament must vote on the rules, something which is expected to happen in December or early 2023.
The ambassadors also published a full text of the deal, revealing details such as that stablecoins not denominated in the euro will be limited to 1 million transactions and 200 million euros ($196 million) in transaction value when marketed in the euro zone.
A joint letter by crypto industry groups Blockchain for Europe and the Digital Euro Association said that the world's three largest stablecoins - Tether, USD Coin and Binance USD - account for 75% of crypto trade volumes and already exceed the transaction-count and volume limits set out in the EU rules.
Anto Paroian, CEO of cryptocurrency hedge fund ARK36, said the curb "will likely limit the EU’s competitiveness and innovation potential".
The European Crypto Initiative, a Brussels-based crypto lobbying group, said in a statement the outcome could be "burdensome".
But it said a more favourable approach to euro-denominated stablecoins was likely to emerge after "initial fears for the EU's financial stability and monetary sovereignty".
Stablecoins are a type of cryptocurrency designed to maintain a constant value, usually via a 1:1 peg with a fiat currency.
"If the directive’s current wording does not change, it will significantly restrict the use of dollar-denominated stablecoins such as USD Coin, Tether, and Binance US," Fabian Astic, Global Head of DeFi and Digital Assets at Moody’s Investors Service, said.
Stefan Berger, a member of the European Parliament who helped to negotiate the final deal, told Reuters: "Indeed, this might increase the euro-pegged stablecoins, which is a welcome development."
Tether's dollar-pegged coin is the world's third largest cryptocurrency, with a market cap of $68 billion, compared to$202 million for the euro-pegged version, CoinGecko data shows.
(Reporting by Huw Jones and Elizabeth Howcroft, editing by Barbara Lewis)