MiCA Enters the Market: Tether Seeks "Agents" to Expand Its Euro Stablecoin Presence as Circle Leads Compliance

The European Union's Markets in Crypto-Assets Regulation (MiCA) has come into effect on June 30 and is set to be fully implemented by December 30 this year.

As the European Union's Markets in Crypto-Assets Regulation (MiCA) comes into full effect, it brings both challenges and opportunities for stablecoin issuers like Tether. With a focus on regulatory compliance, Tether has invested in the Dutch company Quantoz, which is set to launch two MiCA-compliant stablecoins. This move by Tether highlights the strategies being employed in the competitive euro stablecoin market.

On November 18, Tether, Kraken, and Fabric Ventures jointly announced an investment in Quantoz, a blockchain company based in the Netherlands. This investment will support Quantoz in launching two stablecoins, USDQ and EURQ, which are pegged to the US dollar and euro, respectively, and will be listed on Bitfinex and Kraken on November 21. These stablecoins will be fully compliant with the EU's MiCA regulatory framework.

This investment by Tether, known for issuing the world's largest stablecoin USDT, is a strategic move in the context of MiCA's implementation. As Tether has yet to obtain a license to issue stablecoins under the MiCA framework, this investment could pave the way for Tether to expand its presence in the euro stablecoin market. By supporting projects that comply with MiCA regulations, Tether may be able to indirectly participate in this market.

According to Coingecko data, as of November 20, the top five participants in the euro stablecoin market by market capitalization are: Circle's EURC, SG-Forge's EURCV, Tether's EUR₮, Stasis's EURS, and Celo Euro's cEUR. Together, EURC and EURCV account for 40% of the euro stablecoin market, out of a total market cap of $326 million. This market concentration poses challenges for new entrants but also provides an entry point for Quantoz, which has a compliance advantage.

MiCA places stringent requirements on stablecoin issuers, with key provisions including:

Licensing requirements: Issuers must obtain an Electronic Money Institution (EMI) license in at least one EU member state or register as a credit institution.

Reserve asset requirements: At least 60% of reserve assets must be held in European banks.

Trading volume limits: If a stablecoin's daily trading volume exceeds 1 million transactions or daily trading value exceeds €200 million, the issuer will be prohibited from issuing more stablecoins.

Major issuers like Circle and SG-Forge have met these requirements by registering for EMI licenses 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's investment in Quantoz, Tether may have the opportunity to further stabilize its share in the euro stablecoin market through "agents." The search for new companies holding EMI licenses has also become a newly emerging trend.

On November 19, Paxos, a blockchain and tokenization infrastructure platform, announced that it has agreed to acquire Membrane Finance, a licensed electronic money institution (EMI) based in Finland. This acquisition is still subject to regulatory approval. Upon completion, Paxos will become a fully licensed EMI in Finland and the EU.

Tether's CEO Expresses Concerns Over 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 delisted all trading pairs of USDT in Europe. Other major exchanges, such as Binance and Kraken, have not yet delisted USDT but are considering restricting its functionality.

Tether's CEO Paulo Ardoino previously stated that the upcoming regulatory framework in Europe will bring banking-related issues for stablecoin issuers, which could threaten the broader stability of the crypto market. According to MiCA, stablecoin issuers must hold at least 60% of their reserve assets in European banks. Ardoino noted that since banks can lend out up to 90% of their reserves, this could introduce "systemic risk" for stablecoin issuers.

Some major stablecoin issuers have faced banking-related issues in the past. For instance, in March 2023, Circle's USD Coin (USDC) experienced a de-pegging event. 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 ceasing operations.

In Ardoino's view, the banking