Binance MiCA

Binance’s Changpeng Zhao has been extremely supportive when it comes to helping regulators draft appropriate regulation that both prevents and counteracts bad actors whilst not stifling innovation or overly hampering the experience of good actors. For this reason, he has had some thoughts on the recently announced MiCA regulation coming for the EU.

Billionaires in the crypto space has spoken numerous times about how one of the main barriers to entry with crypto is the fact that the regulation isn’t clear enough for some participants, and that once things have been more greatly clarified, there is a wall of capital that will be able to enter the space.

Proposed MiCA regulation is “fantastic but strict”

The regulation that has been drafted in the EU to oversee the cryptocurrency space has been extensive, and at times has drawn ire and ridicule from the cryptocurrency community for being far too dystopian.

CZ has supported the fact that such extensive proposals have been drafted, since the clarity that such regulation can give to the industry is important, but he has made his voice known that he believes these MiCA regulations to be too strict, and suspects that if the proposal went through in its current form, it would damage innovation.

Binance’s headquarters are located in Paris, since at the time CZ believed that the French legislation on cryptocurrencies was favourable, and Europe is a brilliant hub for tech talent. It was an event in Paris last week that he decided to explain why he was concerned about the EU’s plans. The main issue with the proposed legislation is that “the drafts are not adopting USD-based stablecoins, which have 75% of the liquidity in the market.”

Does crypto threaten governments?

One of the reasons that regulation is such a tricky business is due to the ideological beginnings of the cypher punk movement, who at times professed to be extremely libertarian, and in some cases anarchists.

Such ideology is reflected in many of the technologies that have been built since then. For example, Bitcoin was designed in such a way that it could operate as an antithesis to the highly inflationary nature of central banks, and as a consequence many Austrian economists have likened its properties to those that Mises would advocate for, in such that it removes the opportunity for central planning of money.

If Bitcoin is to be used as a currency, then such an ideology of decentralised and apolitical money is something that clearly contradicts the hegemonic Keynesian system of central banking.

Privacy coins, such as Monero, also have the potential to be somewhat controversial given that they make it incredibly easy for people to hide their assets, which is something that the state does not approve of. If the state is to be able to tax and control their citizens effectively, they shan’t be fans of tools that give the citizenry to opt out of mass surveillance. For this reason, the IRS has issued numerous bounties for anyone who is capable of cracking Monero’s privacy encryption.

The EU legislation that has been proposed is known as the Markets in Crypto Assets regulation (MiCA) and allows crypto companies to operate without difficulty within all of the 27 member states of the EU. This should in theory make things much easier for businesses to operate without friction, but it also means that some member states who have different views on cryptocurrency are powerless to do anything about it during the top-down nature of EU governance.

The EU’s attempt to ensure that if their citizens are using crypto, they are predominantly using stablecoins that are pegged to euros rather than dollars is a legitimate one. Even some of Bitcoin’s most hardcore evangelists have argued that stablecoins can be a huge trojan horse for furthering the US’s status as a hegemony: people in other countries who don’t want to hold their own currencies as they are collapsing, may also be interested in holding the US dollar as a stablecoin due to the lack of volatility – over the short-term Bitcoin may still be too volatile an asset.

The regulations are problematic for Binance

There are always unintended consequences to government intervention, and in the case of this legislation it appears that one of those consequences has been to directly make Binance’s product offerings less efficient, despite not doing anything remotely illegal.

Binance previously had plans to auto-convert all of the stablecoins on their platform to BUSD in order to concentrate liquidity on the platform, and to reduce slippage for traders.

Thanks to the MiCA regulations, only offer stablecoin services to their EU clients in euros, then poses a problem for them since liquidity becomes fractured and the user experience is worse.

Also, many people in Europe are quite happy with, or would even prefer, to use stablecoins that are pegged to US dollars, rather than stablecoins that are pegged to euros – as the global reserve currency, the dollar is the most reliable.

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