From the beginning of July, cryptocurrency exchanges and stablecoin issuers in the European Union will operate in accordance with the rules set out in MiCA.
The entry into force of the Markets in Cryptoassets Act (MiCA) on June 30 means big changes for the EU cryptocurrency industry. Among the key provisions of MiCA are the regulation of stablecoins, as well as rules for a wide range of crypto assets and exchange platforms.
What does Mika say?
MiCA is a regulatory framework that unifies and regulates the cryptocurrency market. It defines the classification of digital assets and defines the laws and areas of responsibility for their implementation.
Last April, MEPs voted in favor of the MiCA cryptocurrency regulation bill. The EU became one of the first jurisdictions in the world to introduce comprehensive regulations on crypto assets.
Firms must provide full disclosure to customers, present a public business model, establish an effective governance system, including risk management, register with the European Banking Authority, establish a buyback mechanism, and maintain adequate reserves.
In addition, issuers of asset-related digital tokens (ART) and electronic money tokens (EMT) must disclose sustainability information as of June 30, and cryptocurrency service providers must begin requiring disclosure requirements by the end of the year.
ART issuers (other than credit institutions) can continue to operate if tokens are issued before 30 June, until they are granted or refused a license under MiCA, provided they apply for authorization by 30 July.
Entities that do not comply with MiCA may be subject to financial penalties and may be banned from operating in the EU.
What restrictions have cryptocurrency companies introduced?
As a result of the implementation of MiCA legislation in the European Union, some crypto companies have started to restrict the use of stablecoins.
In March, OKX halted trading of its largest stablecoin, Tether (USDT), for users based in the European Union.
In early June, Binance announced that it would be limiting access to unregulated stablecoins for clients in the European Union. Binance will also be limiting the number of services that may include unregulated stablecoins. Copy trading and participation in the Launchpad and Launchpool programs will no longer be available to European clients of the exchange.
Cryptocurrency exchange Bitstamp said it will delist EURT, the euro-pegged stablecoin Tether, and other stablecoins that do not comply with the European Union’s new crypto asset rules by June 30.
Also, European company Lugh announced that it will stop issuing the EURL stablecoin before the MiCA regulation comes into force.
Stablecoin Market Status
according to Queen GeckoDuring 2023, the EURT stablecoin rapidly lost popularity in the European crypto community. By October last year, the crypto asset’s market cap had fallen almost tenfold compared to its peak in 2022 — from $231 million to $32 million.
EURT is the second largest stablecoin pegged to the euro in terms of market cap. Compared to USDT of the same Tether, EURT’s trading volume is small – only 32.1 million coins as of June 26.
according to a report From analytics firm Kaiko, stablecoins backed by euro reserves account for just 1.1% of the total trading volume of fiat-backed stablecoins.
The study also shows that most (90%) of stablecoin transactions are in assets backed by the US dollar. Only 10% of stablecoins are backed by reserves in other currencies and real assets, including gold.
The weekly trading volume of dollar-denominated stablecoins like USDT exceeds $270 billion. Meanwhile, the total trading volume of euro-denominated stablecoins EURT, EURS, EURCV, AEUR and the like is only around $40 million per week. However, analysts expect growth in this sector as European regulators pressure exchanges to withdraw dollar assets from trading.
What the experts say
Analyst MartyParty generally expects an explosion in stablecoins following the implementation of MiCA. It is believed that banks, institutions and stablecoin issuers in the European Union will begin minting trillions of euro-backed stablecoins in July.
Alexander Ray, CEO and co-founder of Albus Protocol, noted that the new regulations will require all organizations involved in trading using asset-linked tokens to implement several regulatory measures, such as KYC and AML protocols.
He added that the implementation of KYC and AML protocols will definitely increase the operating costs of crypto companies, and in the end users will pay for it.
Sven Muhly, Managing Director of BitGo Europe GmbH, added that by adopting MiCA, Europe is helping to set standards to strengthen international standards regarding rules and regulations related to combating money laundering and terrorist financing. However, users are unlikely to see fully uniform international rules across the board.