The European cryptocurrency market is on the verge of significant changes due to the MiCA regulation, which sets strict requirements, including for stablecoins.
The European cryptocurrency market is set to undergo significant changes with the upcoming implementation of the Markets in Crypto Assets (MiCA) regulation, which will impose strict requirements on various aspects of the digital asset industry. One key area of focus for MiCA is stablecoins, with the new rules posing a particular threat to the continued presence of popular tokens like USDT and DAI on European platforms.
As the January 2025 deadline for the next phase of MiCA approaches, cryptocurrency exchange Coinbase has already taken preemptive measures. On December 13, 2024, the exchange quietly removed a range of popular stablecoins from its European platform, including USDT, DAI, PAX, PYUSD, GUSD, GYEN, and others. The move was prompted by the failure of these tokens to meet the exacting standards set forth by MiCA.
In their place will remain only those tokens that have secured the necessary certification, such as USDC and EURC. The issuer of these stablecoins, Circle, has already confirmed their compliance with the new EU rules.
Among the other stablecoins seeking to enter the European market, Ripple's RLUSD has yet to receive approval, but the company is "actively exploring" avenues to legally do so. Meanwhile, French banking giant Societe Generale is joining forces with Bitpanda to create the EUR CoinVertible (EURCV) stablecoin, which will fully adhere to MiCA standards.
On the other hand, the largest issuer, Tether, appears to be digging in its heels, as the company maintains the bulk of its USDT reserves in US government bonds, repurchase agreements, and money market funds. Additionally, on November 27, Tether quietly dropped support for its euro-pegged stablecoin, EURt (EURT), across all blockchains.
Despite these setbacks, Tether is actively seeking workarounds to maintain its presence in the European market. For instance, the company has made an investment in Dutch firm Quantoz Payments, which is planning to launch USD/Euro-denominated tokens that will comply with MiCA regulations. Furthermore, on December 17, Tether announced an investment in StablR, a European stablecoin provider that was granted a Class 3 Electronic Money Institution (EMI) license by the Malta Financial Services Authority in July. At present, StablR offers EUR (EURR) and USD (USDR) stablecoins on the Ethereum and Solana blockchains, both of which are MiCA-approved. However, these tokens have very low capitalization.
While the stringent regulation of stablecoins in the EU is intended to bolster consumer protection, it could also have profoundly detrimental effects on the cryptocurrency market, potentially leading to monopolization, reduced liquidity, and capital outflows. On the flip side, users will undoubtedly benefit from enhanced guarantees and safeguards.
A recent report from Kaiko and Dutch cryptocurrency exchange Bitvavo revealed that trading volumes in euro-pegged stablecoins are steadily increasing, and the tokens are indeed adapting to the new MiCA rules. The total monthly trading volume in euro stablecoins for November amounted to nearly $800 million.
