MiCA Effect: Coinbase starts complying with EU stablecoin regulations

Cryptocurrency exchange giant Coinbase plans to delist stablecoins that fail to comply with European Union (EU) regulations by December 2024 in order to comply with EU rules for markets in crypto assets (MiCA). The MiCA framework targets digital assets and their issuers and is the most diverse and complete regulatory framework in the world. Coinbase stated: “Given our commitment to compliance, we plan to limit the provision of non-MiCA-compliant stablecoins to users in the European Economic Area (EEA) through December 30, 2024.”

MiCA regulates stablecoin issuers must obtain license EMI

The MiCA rules, which come into effect on June 30, 2024, require stablecoin issuers to obtain an electronic money institution (EMI) license in at least one EU member state in order to continue operating in the 27-nation bloc. Coinbase also limits the provision of regulated stablecoins due to regulatory compliance.

Different Compliance Strategies for Circle and Tether

While some stablecoin issuers have quickly adapted to these regulations, others have not. Circle, the world’s second largest stablecoin issuer, became the first company to obtain an EMI license in the EU in July, which allows Circle to legally issue its stablecoins, including USDC and EURC, in the EU market.

(Circle becomes the first MiCA-compliant stablecoin merchant, will Tether’s leading position be shaken?)

However, Tether, the world’s largest stablecoin issuer, has not yet obtained an electronic currency license that complies with MiCA. Although Tether has a considerable market share, it is still unauthorized under current EU regulations.

Tether responds: It is solving the EU’s needs through technology

Tether expressed support for the EU’s efforts to establish a structured regulatory framework through MiCA. However, the stablecoin issuer also acknowledged that some regulations make operating in the EU more complicated.

A Tether spokesperson said: “Tether appreciates the efforts of EU regulators to establish a structured framework, which is very important to the development of the industry. However, some of the provisions of MiCA make the operation of EU licensed stablecoins more complex and may impose restrictions on local banks. Infrastructure and stablecoins themselves bring new risks.”

To address these complexities and support its users in the EU, Tether revealed that it is working on developing a technology solution to meet the needs of the European market.

(MiCA will be launched at the end of the month, and Tether CEO is worried about the operational risks of stable currency)

Coinbase Synchronizes Supporting Measures

Coinbase plans to release more information in November about its strategy to offer customers in the European Economic Area (EEA) the option to convert to stablecoins issued by authorized entities, such as Circle’s USDC and EURC.

Binance, OKX, Kraken and other exchanges have responded

Binance announced in June that it would limit the currency exchange function and can only convert compliant stablecoins. In August this year, Binance announced the listing of EU MiCA-compliant stablecoin Eurite (EURI).

(EU MiCA new stablecoin regulations are about to take effect: How Binance ensures compliance)

OKX is said to have also delisted USDT trading pairs in the EEA region. On the other hand, the US compliance exchange Kraken has also long stated that it is considering delisting USDT in the EU.

What are the possible impacts of MiCA’s stablecoin specification?

The author believes that the three industrial roles: issuers, exchanges, and users will each have their own pros and cons.

Issuer: MiCA stablecoin specifications require issuers to register in the EU and obtain a license. Although Tether has always been the leader in stablecoins, its approach to offshore operations and passive compliance puts it at a disadvantage in the EU regulatory environment. This will give Circle, an American player already deployed in the EU, or other EU local stablecoin players and banks a chance to take root.

Exchanges: The legal status of exchanges in the EU has always been ambiguous, and all companies have passively responded to compliance with their products. In recent years, regulations and law enforcement on cryptocurrency in countries such as France or the United Kingdom outside the EU have discouraged many industry players. Restrictions on USDT may force most exchanges to face the EU government and give law enforcement agencies more reasons to regulate. However, for exchanges that are willing to comply with regulations, MiCA may be able to gain a wider market.

Users: No matter where in the world, users can widely use different platforms through various channels. Only when entering and exiting legal currency, they need to consider the operating capabilities of local operators, so the impact of this regulation is limited. However, the widespread implementation of MiCA may allow more international players to choose whether to stay in the market and restrict IP use. It may become more troublesome for EU users to bypass restrictions.

Since stablecoins are currently the most commonly used crypto-assets for illegal activities, money laundering, fraud, drug trafficking and terrorist financing have all adopted this convenient medium, although Tether has also worked hard to take measures to combat illegal activities. But it is understandable that regulatory agencies around the world are working hard to supervise the abuse of stablecoins and virtual asset service providers.

(The United States was defrauded of 2.6 billion magnesium a year! Transnational pig-killing scam: Chinese businessmen are connected to Southeast Asia’s cryptocurrency financial flow network)

This article MiCA fermentation! Coinbase removes EU non-compliant stablecoins, what are the implications of deactivating USDT? First appeared in Chain News ABMedia.