The following is a guest post and opinion of Sveinn Valfells, Co-founder of Monerium.
To unlock the potential of stablecoins, Europe’s currencies must be accessible domestically and internationally as euros, zloty, and krona onchain. The good news is that Europe has a tried and tested legal framework for digital cash called e-money, introduced in 2000. The bad news is that Europe has hobbled itself by wrapping e-money issued onchain with a thick layer of unnecessary red tape.
However, MiCA violates the technical neutrality of e-money and imposes tariffs and anti-competitive restrictions by creating additional requirements for e-money onchain.
For example, MiCA turns banks into gatekeepers for issuers of e-money onchain. Unlike regular e-money which can be 100% safeguarded directly in high-quality liquid assets such as government bonds, MiCA requires stablecoin issuers to safeguard at least 30% of their customers’ funds with banks, requiring them to share their income with the banks. That’s a direct tariff payable to the banks.
The MiCA bank safeguarding requirement also makes e-money onchain more risky because it inserts the banks and their balance sheets where they need not be. The higher risk of holding money with banks is a tariff because it requires e-money issuers to hold larger reserves.
The MiCA bank safeguarding requirement is also illegal. It directly violates the European e-money directive which explicitly states that one of its key goals is to ensure “fair competition” and a “level playing field” between e-money issuers and banks. The MiCA bank safeguarding requirement does exactly the opposite: it shifts the playing field in favor of the banks.
Meanwhile, the EU is hobbling itself by making the tried and tested e-money regulations more anti-competitive, costly, and risky for European stablecoins. Like Draghi says: “A fundamental change in mindset” is needed.
The solution is simple. Firstly, the EU should remove all the blockchain specific requirements for e-money and rip the unnecessary red tape out of the otherwise mostly sensible MiCA regulations.
Secondly, the ECB (and other EU central banks) should further level the playing field between banks and e-money issuers.
