Below are guest posts and opinions from Sveinn Valfells, co-founder of Monerium.
Mario Draghi is correct. Europe is struggling with considerable tariffs, including regulations regarding the “most innovative part of the service sector – digital.” The European Union has done exactly what the practical form of digital money could have a major positive impact on GDP by creating tariffs on Stablecoins.
European stablecoins promise
Stablecoins are digital money on the blockchain. Stirling as a dollar, euro or crypto coin. They are FinTech’s new “killer apps,” programmable cash that travels peer-to-peer without intermediaries, instantly and virtually free, powering global payments and applications such as automated lending and securities transactions.
Stablecoins allow Fintechs to build new applications faster and cheaper than ever. They allow for “open banking of steroids” twice by lifting funds from banks, payment providers and their own closed fintech technology. They are “room temperature superconductors of financial services,” which remove barriers to financial flow and significantly boost GDP.
Stablecoins are more than an abstract financial innovation. They had French Polish workers send the euro home immediately for the cent, rather than paying a few euros and waiting for two days. These allow German startups to raise money efficiently through automated issuance of compliant digital stocks and debts rather than slow, expensive and inflexible manual documents.
To unlock the possibilities of stubcoins, European currencies must be accessible nationally and internationally as euros, Zloty, and Krona Onchain. The good news is that we tried and tested the legal framework for digital cash introduced in Europe in 2000, called e-Money. The bad news is that Europe is ridiculous by wrapping e-money issued on-chains with thick layers of unnecessary red tape.
How MICA creates unfair barriers for innovation
E-Money is a great regulatory innovation. This is a digital cash bearer’s tool for payments. Dozens of companies, including PayPal, Revolut and Wise, are using e-Money to serve millions of customers with billions of online, mobile and card transactions. E-Money is the ultimate form of Stablecoin, as if it was made for Onchain Economy.
In the newly passed EU markets with Crypto-Assets Regulations (MICA), Stablecoins must become electronic money. This makes a lot of sense as electronic money is a “technically neutral” form of digital cash in blockchain and MICA.
However, MICA violates the technical neutrality of electronic money and imposes tariffs and anti-competitive restrictions by creating additional requirements for electronic money on-chain.
For example, MICA turns the bank into a gatekeeper for the issuer of e-Money Onchain. Unlike regular e-money, which can be 100% protected with high-quality liquid assets such as government bonds, MICA requires at least 30% of its clients’ funds to be protected with the bank and share revenue with the bank. It is a direct duty paid to the bank.
Mica Bank’s protection requirements make e-money-on-chain more risky as they insert banks and their balance sheets where they are not needed. The risk of holding money in a bank is customs duties, as it requires e-money issuers to retain larger reserves.
MICA Bank protection requirements are also illegal. It directly violates European e-money directives, which explicitly states that one of its important goals is to ensure a “fair competition” and a “situation of equal playing field” between e-money issuers and banks. Mica Bank’s protection requirements are the exact opposite. Shifting the arenas that are advantageous to banks.
Leveling the stadium
Americans like to beat European regulations, and there are no ridiculous regulations. Nevertheless, the Trump administration will “digitally increase the use of the US dollar to ensure (and) control of the US dollar internationally” in favor of passing a stable coin bill that reflects European electronic money.
Meanwhile, the EU is hobling itself for European stables by putting trial and tested electronic money regulations at more competitive, cost and risk. As Draghi says, there is a need for a “fundamental change in thinking.”
The solution is simple. First, the EU should remove all blockchain-specific requirements for electronic money and rip unnecessary deficits from otherwise mostly sensible MICA regulations.
Second, the ECB (and other EU central banks) need to further level the arena between banks and e-money issuers.
how? The ECB recently granted non-bank fintech, including direct access to the e-money issuer, ECB payment system. This is useful for e-money issuers by providing direct access to the same core payment system as the bank.
The ECB must take another step to provide direct access to the shelter to the e-money issuer. The leading IMF economists have already proposed this idea. This will remove any unnecessary gatekeepers and tariffs between the ECB and the issuer of Euro Stablecoins, helping to maximize the potential of the European and Euro on-chain economy.
