MiCA Stablecoin Rules: What They Mean and How Binance Is Complying

Main Takeaways

• New stablecoin rules imposed by the EU's Markets in Crypto-Assets (MiCA) framework came into effect on June 30, 2024, impacting the stablecoin and wider digital-asset market throughout the European Economic Area (EEA). This blog describes Binance's approach to complying with the new rules.

• Binance is restricting the availability of Unauthorized Stablecoins for EEA users, implementing phased changes and product restrictions to ensure compliance and minimize market disruption.

• Binance's approach aims to fulfill MiCA objectives smoothly by transitioning users from Unauthorized Stablecoins to Regulated Stablecoins over time, as more Regulated Stablecoins become available in the market.

On June 30, 2024, the new MiCA Stablecoin rules came into effect across the European Economic Area (EEA). This was the first step in entering the new regulatory framework, which has a significant impact on the stablecoin market in the EEA. As our users need to understand the impact of the upcoming changes, we will explain below some of the important details about what the new rules are and how Binance is implementing them.

How will MiCA impact you as a user?

Since June 30, 2024, stablecoins have been regulated in the EEA, which means in practice that only certain regulated companies can issue and offer to the public stablecoins (those stablecoins will be “Regulated Stablecoins”).

Several existing stablecoins may not fall into this category and will therefore be subject to certain restrictions. These will be categorized as “Unauthorized Stablecoins.”

Binance is making phased changes to Unauthorized Stablecoins’ availability, which are detailed below. These transitional measures aim at allowing EEA users to switch to Regulated Stablecoins while avoiding any market disruption and complying with MiCA stablecoin rules. 

In short, from June 30, 2024, Binance has been restricting the availability of Unauthorized Stablecoins for EEA users across its product offerings. In particular:

1. Binance Convert: Convert functions for Unauthorized Stablecoins are available in a “sell-only” mode. For example, EEA users can convert to other tokens (such as BTC or a Regulated Stablecoin).

2. Spot Trading: Spot trading pairs with Unauthorized Stablecoins are available until further notice. 

3. Wallet: You can withdraw or deposit your stablecoins from or to your Binance wallet. 

For more details, continue reading. 

What are the stablecoin rules under MiCA?

From June 30, 2024, MiCA requires that certain stablecoin activities be undertaken only by electronic money institutions (EMIs) and credit institutions (or, more simply: banks).

In essence, this means that in the EEA, only EMIs and banks can:

1. Issue/mint stablecoins  

2. Communicate offers to encourage the purchase of stablecoins  

3. Ask trading platforms to list their stablecoins. 

For more details, you can consult the official summary of MiCA made by public authorities, available here. 

How is Binance complying with MiCA Stablecoin rules?

Binance is committed to complying with any and all relevant regulatory requirements while protecting users from any loss or market disruption.

 As such, starting from June 30, 2024, Binance has been implementing the following measures: 

• General product restrictions:  Binance has been implementing product restrictions across its entire product offering. These restrictions prevent users from entering into new products or service offerings involving Unauthorized Stablecoins. All Binance products are affected. For more details click here . 

• Binance Convert: Convert functions for Unauthorized Stablecoins are maintained in a “sell-only” mode. This means in practice that EEA users can sell Unauthorized Stablecoins for: other digital assets (such as bitcoin or ether), Regulated Stablecoins, or fiat currencies (depending on the availability of fiat channels in your jurisdiction). This allows users to easily switch to Regulated Stablecoins. Buying Unauthorized Stablecoins with Convert is not possible since June 30, 2024. 

• Spot Trading: Spot trading pairs with Unauthorized Stablecoins remain available until further notice. During the interim period, digital asset trading pairs with Unauthorized Stablecoins will coexist with trading pairs with Regulated Stablecoins.

• Wallet: Custody and wallet services of Unauthorized Stablecoins continue. You can withdraw or deposit your stablecoins from or deposit them to your Binance wallet. 

Why is Binance taking this approach?

Binance’s approach aims to comply with the requirements of MiCA while avoiding market disruption. Our transitional approach was designed to minimize any potential harmful impacts to the EEA and global crypto market that could arise from users rushing to swap their stablecoin holdings while limited exit avenues exist.  

Currently, there are few Regulated Stablecoins with limited liquidity that may not be sufficient to support sudden demand across the industry. Over the coming months, we expect to see more Regulated Stablecoins available in the market, which will allow for the market to fully switch to Regulated Stablecoins over time, ensuring that the objectives of MiCA are fulfilled.

As the largest centralized exchange by trading volume, we take our responsibility to protect our users and safeguard the stability of the market very seriously, by ensuring that our actions do not create panic and instability in the market, while also meeting our regulatory obligations. Our approach described above aims to meet this objective.