MiCA vs cryptocurrencies: will USDT and other stablecoins survive in the EU?
including their composition, liquidity, and storage location. This information should also be publicly available.
The reserves of stablecoins must be audited by independent auditors with regular publication of results.
Issuers are required to ensure the possibility of quick and unobstructed exchange of stablecoins for the base currency (e.g., euro or US dollar).
Reserves must be structured in such a way as to avoid any liquidity or insolvency risks.
In the event of an issuer's collapse, stablecoin holders have the right to reimbursement within the limits of the reserves.
Issuers must provide consumers with complete information about the operation of the stablecoin, the risks associated with it, and the mechanisms of stability.
Stablecoins that have significant trading volume or are widely used are considered 'significant'. Additional requirements apply to such assets: the daily turnover must not exceed €200 million, no more than 1 million daily transactions, increased regulatory oversight, including from the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA).
Issuers must obtain a license in the EU and operate in accordance with the national legislation of EU member states.
Must be registered in an EU country and comply with local regulatory authorities.
Results of new MiCA enhancements
These requirements have already led to the fact that the cryptocurrency exchange Coinbase temporarily removed several popular stablecoins from its European platform on December 13, 2024, including USDT, DAI, PAX, PYUSD, GUSD, GYEN, DAI. The main reason for this was their non-compliance with MiCA standards.
TOP-5 stablecoins by market capitalization.
Only those tokens that have the appropriate certification will remain, such as USDC and EURC. Circle, the issuer of these stablecoins, has already stated that they comply with the new EU rules.
RLUSD from Ripple has not yet received approval, but the company is 'actively exploring' ways to legally enter the EU market.
French banking giant Societe Generale, in partnership with Bitpanda, is developing the EUR CoinVertible (EURCV) stablecoin, which fully complies with MiCA standards.
Meanwhile, the largest issuer Tether is only pushing back, as the company keeps most of its USDT reserves in US government bonds, REPO transactions, and money market funds. Additionally, on November 27, Tether ceased support for its euro-pegged stablecoin EURt (EURT) on all blockchains.
But is actively seeking ways to circumvent and remain in the market. For example, the company invested in the Dutch firm Quantoz Payments, which plans to issue tokens denominated in USD/Euro that comply with MiCA requirements. Additionally, on December 17, Tether announced investments in European stablecoin provider StablR, which received an Electronic Money Institution (EMI) license from the Malta Financial Services Authority in July. Currently, StablR offers MiCA-approved euro (EURR) and dollar (USDR) stablecoins on the Ethereum and Solana blockchains. However, these tokens have very low capitalization.
How will the exit of some stablecoins affect the EU market?
Stablecoins like USDT are an important tool for fast transactions and preserving asset value in US dollars. Their removal could limit European traders and investors, forcing them to use only a limited list of alternatives, such as USDC or EURC. This could push the market toward monopolization by a few players: Circle and Coinbase. This contradicts the decentralized nature of cryptocurrencies.
USDT accounts for over 12% of all trading on the Coinbase platform, with a daily transaction volume of around $1 billion. Banning such a volume of assets could lead to reduced market activity and decreased liquidity.
Financial institutions using stablecoins for cross-border transfers or integration with DeFi may face additional costs to comply with MiCA requirements.
Some users may switch to platforms outside the EU or use other digital assets, which will decrease the attractiveness of the European crypto market.
The stringent regulation of stablecoins in the EU, while aimed at protecting consumers, may have serious negative consequences for the cryptocurrency market. For example, it could lead to monopolization, reduced liquidity, and capital outflows. On the other hand, users will receive more guarantees and protection.
MiCA is making euro stablecoins more popular. Source: research.kaiko.com
A new report from research firm Kaiko and the Dutch cryptocurrency exchange Bitvavo showed that trading volumes in euros are gradually increasing, and stablecoins are adapting to the new MiCA rules.
Monthly volumes of euro stablecoins in November amounted to nearly $800 million.
#CoinbaseExchange. #USDT #USDC #EC #Tether
