Italy is preparing to enhance its monitoring of the cryptocurrency markets in order to comply with the European Union’s Markets in Crypto-Assets (MiCA) regulatory framework. The new regulations aim to prevent and penalize insider trading and market manipulation schemes. Violations of the regulations could result in fines ranging from €5,000 to €5 million ($5,400–$5.4 million), depending on their severity and extent.
The MiCA regulatory framework, which was initially introduced in 2022, is presenting challenges for blockchain firms. Decentralized finance (DeFi) protocols, in particular, are faced with a difficult decision: either fully decentralize their networks or comply with the Anti-Money Laundering and Know Your Customer regulations outlined in the framework. Fully decentralized networks are exempt from MiCA’s reporting requirements. However, protocols that use intermediaries or foundations to moderate decentralized communities run the risk of not meeting MiCA’s criteria for sufficient decentralization. As a result, these DeFi protocols must either fully decentralize or require users to provide verification data, which may not be well-received by network participants.
In response to MiCA, centralized exchange Binance has informed its European customers that it will categorize stablecoins as either authorized or unauthorized, aligning with the framework. Binance will gradually transition users to the new system over time but will not delist stablecoins from spot markets; it will only restrict availability to European users for certain products. Uphold, another platform, has also made changes to comply with the EU’s regulatory overhaul by delisting six stablecoins, including Tether (USDT), Frax Protocol (FRAX), Pax Dollar (USDP), Dai (DAI), TrueUSD (TUSD), and Gemini Dollar (GUSD).
Despite increasing regulatory pressure in Europe, many experts believe that stablecoins have a promising future and could potentially help mitigate debt crises caused by overprinted fiat currencies. Former United States House of Representatives Speaker Paul Ryan has argued that stablecoins could alleviate shortfalls in the U.S. economy resulting from the debt-laden U.S. dollar. Jeremy Allaire, CEO of stablecoin issuer Circle, is also optimistic about the future of stablecoins, predicting that they will represent 10% of the money supply in the next decade.