JPMorgan Anticipates Increased Adoption of Euro Stablecoins Following EU's MiCA Regulations Implementation

Nikolaos Panigirtzoglou, who led the report, stated that MiCA-compliant stablecoins will be prioritized for trading pairs in regulated EU markets.

JPMorgan analysts anticipate increased adoption of euro stablecoins following the implementation of the EU’s MiCA regulations on Dec. 30, 2024. Currently, euro-denominated stablecoins account for only 0.12% of the global stablecoin market. However, the new framework is expected to drive financial institutions and banks in Europe to utilize euro stablecoins for blockchain-based settlements and customer transactions.

The report, led by Nikolaos Panigirtzoglou, highlights that MiCA-compliant stablecoins will be prioritized for trading pairs in regulated EU markets. As a result, exchanges across the EU will adjust their offerings to align with the MiCA regulations.

Some key examples of euro-pegged stablecoins include Societe Generale’s EURCV and BBVA’s planned stablecoin developed in partnership with Visa. Both projects showcase growing institutional interest in compliant stablecoins.

MiCA’s Impact on Global Stablecoin Issuers. The MiCA regulations stipulate that stablecoin issuers must secure licenses within the EU and maintain adequate reserves in European institutions. Non-compliant stablecoins are already facing the heat. For example, Coinbase recently delisted Tether’s USDT, largely due to concerns over its compliance with MiCA rules.

Circle’s EURC has gained ground under the new regulations due to its compliance, while Tether’s EURT has notably struggled to meet the standards. Despite these difficulties, Tether remains a massive player in the global stablecoin market, especially in Asian markets where regulatory demands are less stringent.

To maintain its presence in the EU, Tether has been seen making strategic investments in MiCA-compliant platforms. One example is Quantoz Payments, a European payment service provider that has integrated Tether’s EURT stablecoin. Another is StablR, a European stablecoin issuer. These partnerships could help non-compliant issuers adapt to the changing regulatory landscape.

MiCA’s Ban on Algorithmic Stablecoins Notably, the EU’s MiCA regulations have banned algorithmic stablecoins, excluding them from the asset-referenced token (ART) classification. This is because algorithmic stablecoins do not have the required reserves tied to conventional assets, which is a key compliance requirement under MiCA.

The framework mandates that stablecoins maintain a 1:1 liquid reserve ratio. Issuers must also seek authorization before offering or listing electronic money tokens (EMTs) or ARTs in the EU. This includes publishing an approved whitepaper and meeting the criteria set by EU authorities.

The European Banking Authority (EBA) may classify issuers as “significant” based on specific criteria, subjecting them to stricter oversight. These rules are designed to protect the EU’s financial stability and monetary sovereignty.

Growing Institutional Interest in Euro Stablecoins as MiCA Enforces Clear Compliance Guidelines, Driving Adoption. With MiCA enforcing clear compliance guidelines, institutions like Societe Generale and BBVA are leading efforts to integrate euro stablecoins into their operations. These regulations aim to promote trust in the EU’s financial markets while enhancing the adoption of euro-denominated stablecoins.

By ensuring compliance, MiCA regulations may gradually expand the market share of euro-pegged stablecoins, especially through institutional use. The framework emphasizes financial stability while fostering a regulated environment for blockchain innovations.