As Tether has not yet obtained a stablecoin issuance license under the MiCA framework, it is actively seeking solutions by investing in emerging projects.
Article Author: Weilin, PANews
The EU's (Markets in Crypto-Assets Regulation) (MiCA) regulatory rules for stablecoin issuers came into effect on June 30 and are set to be fully implemented by December 30 this year. As the first complete regulatory framework for the crypto industry in the EU, the implementation of MiCA not only affects the euro stablecoin market but also provides a reference for global stablecoin regulatory models.
However, USDT issuer Tether is facing urgent challenges in this context. As it has not yet obtained a stablecoin issuance license under the MiCA framework, Tether is actively seeking solutions by investing in emerging projects. On November 18, Tether announced an investment in the Dutch company Quantoz, which will launch two MiCA-compliant stablecoins.
Circle leads compliance, with 21 issuers competing for the market
On November 18, the Dutch blockchain company Quantoz announced the launch of two stablecoins, USDQ and EURQ, compliant with EU regulatory standards under MiCA, which are pegged to the US dollar and euro, respectively. These stablecoins will be listed on the exchanges Bitfinex and Kraken on November 21. It is reported that Tether, Kraken, and Fabric Ventures have invested an undisclosed amount in Quantoz.
Quantoz's compliance layout indicates that Tether is attempting to expand its presence in the euro stablecoin market by supporting projects that comply with MiCA regulations. This investment can be seen as a key step for Tether in seeking 'agents' in the euro stablecoin sector.
As of November 20, according to Coingecko data, the top 5 participants in the euro stablecoin market by market cap are:
Stasis (EURS): Market Cap $131 million
Circle (EURC): Market Cap $89.49 million
Société Générale's subsidiary SG-Forge (EURCV): Market Cap $41.91 million
Tether (EURT): Market Cap $26.99 million
Angle (EURA): Market Cap $21.18 million
According to Coingecko data as of November 20, the total market cap of euro stablecoins is $326 million, with Circle's EURC and SG-Forge's EURCV collectively accounting for 40% of the euro stablecoin market. This market concentration presents challenges for new players but also provides an entry point for Quantoz, which has compliance advantages.
MiCA imposes strict requirements on stablecoin issuers, including the following key provisions: First is the licensing requirement: issuers must obtain an Electronic Money Institution (EMI) license or register as a credit institution in at least one EU member state. Second is the reserve asset requirement: at least 60% of reserve assets must be held in European banks. Additionally, there are trading volume limits: if a stablecoin's daily trading volume exceeds 1 million transactions, or the daily trading amount exceeds €200 million, the issuer will be prohibited from issuing more stablecoins.
Major issuers like Circle and SG-Forge have met the above requirements by obtaining EMI licenses registered in France. For example, SG-Forge's EURCV operates on Ethereum and recently announced plans to launch on Ripple's XRP Ledger (XRPL) to expand its market coverage.
With Tether investing in Quantoz, Tether may have the opportunity to further stabilize its market share in the euro stablecoin market through 'agents'. Finding new companies holding EMI licenses has also become a newly emerging trend.
On November 19, the blockchain and tokenization infrastructure platform Paxos announced that it has agreed to acquire the licensed electronic money institution (EMI) Membrane Finance (Membrane), headquartered in Finland. The acquisition is subject to regulatory approval. Once completed, Paxos will become a fully licensed EMI in Finland and the EU.
Tether CEO expresses concerns about MiCA; more companies seek competitive 'agents'
For Tether, the new requirements brought by MiCA pose urgent challenges. According to previous reports, Coinbase Global Inc. plans to delist all unauthorized stablecoins from its European crypto exchange by the end of the year, which could impact tokens like Tether's USDT.
Currently, major cryptocurrency exchanges, including Uphold, Bitstamp, Binance, Kraken, and OKX, are taking measures to comply with the EU's new cryptocurrency regulations. OKX has already removed all trading pairs of USDT in Europe. Other major exchanges, such as Binance and Kraken, have not yet removed USDT but are considering restricting its functionality.
Tether's CEO Paulo Ardoino previously stated that the upcoming regulatory framework in Europe will bring issues related to banks for stablecoin issuers, which could threaten the broader stability of the crypto market. This is because, according to MiCA, stablecoin issuers must hold at least 60% of their reserve assets in European banks. Ardoino noted that considering banks can lend out up to 90% of their reserves, this could introduce 'systemic risk' for stablecoin issuers.
Some major stablecoin issuers have previously faced banking-related issues. For example, in March 2023, Circle's USD Coin (USDC) experienced a decoupling from the dollar. At that time, Circle was unable to withdraw $3.3 billion in reserves from Silicon Valley Bank, which had previously managed $40 billion in reserves for the stablecoin issuer before it ceased operations.
According to Ardoino, the banking reserve requirements imposed by MiCA mean that an increasingly large portion of stablecoin reserves will be held on bank balance sheets. If a bank goes bankrupt, this could have significant implications. Ardoino pointed out: "If you deposit €1 million into a bank account in Europe, the federal deposit insurance for that bank is capped at €100,000. If the bank goes bankrupt, you can recover €100,000, and the remainder will enter bankruptcy liquidation because the money you deposited has already been counted as part of the bank's balance sheet."
However, Ardoino added that under the new MiCA regulations, stablecoin issuers can protect themselves from potential bankruptcy risks through securities: "The protective measure is to purchase securities such as treasury bills or government bonds. If a bank goes bankrupt and you own securities, those securities are nominal assets, so they will be returned to you; you just need to transfer them to another bank."
The crypto industry calls for an extension of the MiCA transition period
Recently, the crypto industry sent a letter to the European Securities and Markets Authority (ESMA), pointing out that ESMA has yet to finalize the details of the rules, making it difficult for businesses to complete the certification process in a short time, potentially forcing them to suspend services.
Currently, MiCA has an 18-month regulatory transition period, but the duration chosen by each member state varies. For instance, France and Greece have an 18-month period, while Lithuania has only 5 months, which may lead to interruptions in cross-border services, affecting users' trading capabilities and causing financial losses.
Additionally, crypto industry organizations have stated that the uneven implementation of MiCA rules threatens the 'passport mechanism.' The core advantage of MiCA lies in the 'passport mechanism,' which allows a company that obtains certification in one member state to provide services throughout the EU. However, inconsistencies in rule enforcement could undermine this advantage.
Representatives of the crypto industry are urging ESMA to extend the authorization transition period until the end of June 2025, or to request a coordinated and unified timetable from member states to alleviate compliance pressure on businesses and avoid service interruptions.
According to previous estimates, the effectiveness of MiCA is expected to drive significant growth in the euro-backed stablecoin sector. By 2025, the market cap of euro stablecoins is expected to reach at least €15 billion, rising to €70 billion by 2026, and possibly surpassing €2 trillion by 2028.
Overall, with the full implementation of MiCA, traditional financial institutions such as Société Générale, blockchain companies like Circle and Stasis, as well as emerging issuers like Quantoz are actively positioning themselves to compete in this market. In the future, compliance and technological innovation will become key factors in determining market winners and losers. It can be said that for stablecoin issuers, MiCA represents a turning point filled with both risks and opportunities.
