On June 30, 2024, the "Markets in Crypto Assets" (MiCA) regulation will come into effect across Europe, introducing measures to limit the expansion of overseas-managed stablecoins in favor of local ones tied to the Euro.
Major exchanges like Binance, OKX, and Kraken have already adjusted their offerings to comply with the new regulations. While this aims to boost Euro-pegged stablecoins, it may hinder technological growth in the EU's crypto sector.
Key Points of MiCA Regulation:
Consumer Protection and Compliance: MiCA sets strict guidelines for crypto-asset issuers, service providers, and exchange platforms, focusing on consumer protection, anti-money laundering, environmental impact, and corporate social responsibility.
Stablecoin Restrictions: The regulation particularly impacts stablecoin issuers. Only stablecoins supervised by the European Banking Authority (EBA) and holding an electronic money license can be freely traded in Europe. This excludes many established stablecoins like USDT, which lack the required licenses.
Trading Volume Limit: A maximum daily trading volume of 200 million euros (quarterly average) is imposed on stablecoins, a significant reduction from current levels.
Impact on USD-Pegged Stablecoins: Experts like Mathieu Hardy consider this a strong discrimination against USD-pegged stablecoins. Currently, USD-backed stablecoins dominate the market, while Euro-backed stablecoins hold a minimal share.
Opportunities for Euro-Pegged Stablecoins:
According to Kaiko Research, MiCA could serve as a springboard for Euro-pegged stablecoins. Some European banks, like Société Générale, have already launched their own stablecoins, and trading volumes for Euro-pegged stablecoins have increased significantly since MiCA was approved in October 2023.
Exchange Adjustments:
Exchanges are adapting to MiCA by delisting non-compliant stablecoins. For example:
Binance: Differentiating between regulated and unauthorized stablecoins, with some products suspended.OKX: Delisted USDT in March.Kraken: Currently not planning to delist USDT.
Criticisms and Concerns:
Paolo Ardoino, CEO of Tether, criticized MiCA, arguing that requiring issuers to hold 60% of reserves in bank deposits is counterproductive. The European Central Bank insures only up to 100,000 euros in bank deposits, far less than the market cap of USDT. Tether's diversified reserves, including cash, US treasury securities, and Bitcoin, provide greater security.
Overall, while MiCA aims to strengthen the Euro's presence in the stablecoin market, it poses challenges for the existing dominance of USD-backed stablecoins and could potentially slow technological progress in the European crypto sector.
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