European Regulation MiCA Set to Disrupt Global Stablecoin Market
Summary:
The fourth-largest cryptocurrency exchange globally has delisted its primary stablecoin for an entire continent, indicating disruptions due to Europe's Markets in Crypto-Assets Regulation (MiCA) commencing at the end of June. Current market leaders might need to step aside as they struggle to meet the compliance for the regulatory changes. MiCA could complete the market with more robust players and eventually provide a more secure environment for stablecoin users and issuers. However, it may also result in substantial short-term disruptions and significant costs for stablecoin issuers needing to comply with the stringency of MiCA regulations.
The global fourth biggest cryptocurrency exchange has delisted its leading stablecoin for an entire continent, warranting attention. It may signify the onset of major disruptions as Europe's trailblazing Markets in Crypto-Assets Regulation (MiCA) takes effect in late June. Off-shore stablecoins may encounter obstacles, but MiCA could ultimately offer a more secure and robust environment for stablecoin issuers and users, sources reveal to Cointelegraph.
Recently, Seychelles-based crypto-exchange OKX delisted Tether (USDT) trading pairs ahead of MiCA for users in the European Economic Area (EEA). They announced that only EUR and USDC trading pairs would be available for future spot trading.
Market analysts weren't taken aback by this development. Christian Catalini, the founder of Massachusetts Institute of Technology Cryptoeconomics Lab, expected such a move. He believes the stablecoin market will undergo significant changes worldwide as new regulations are introduced and new players, many from traditional banking and fintech, come into the picture.
Arvin Abraham, a partner at UK-based law firm Goodwin Procter, thinks there's more to come. If a stablecoin isn't compliant post-MiCA, exchanges are likely to remove it for European customers, he told Cointelegraph.
Since no significant global stablecoin is European, the EEA could see a substantial shift in the landscape following MiCA’s introduction, added Abraham. Current market leaders may need to step aside if they can't meet compliance requirements.
Jean-Baptiste Graftieaux, global CEO at France’s Bitstamp cryptocurrency exchange, confirmed that strict MiCA requirements would affect stablecoin offerings in the European Union. Stablecoin issuers will have to be an EEA entity and must be authorized as an Electronic Money Institution firm in the EEA.
Abraham points out the unique cost for non-European issuers to set up a certified entity in an EU member state, along with other requirements like maintaining 1:1 reserves to cover claims and providing quarterly reports to their EU home state regulator for stablecoins valued over 100 million euros.
Jon Helgi Elisson, former chairman of the Central Bank of Iceland and co-founder of Monerium, a company issuing compliant on-chain fiat stablecoins in Europe, expressed concern over current stablecoin offerings in Europe being non-compliant with existing rules, let alone those that will be implemented in June.
Elisson pointed out that compliance would be extremely costly for some stablecoin issuers. The incoming MiCA regulation also distinguishes between "significant" and "non-significant" issuers, demanding more company equity is set aside against losses for the former.
While Abraham expects MiCA to disrupt the market as Tether is the most popular stablecoin worldwide, he also believes that the ecosystem would be safer in the long run as replacements would comply with MiCA's strict safeguards.
In the end, the framework aims to balance blockchain technology's revolutionary capability with legal clarity, creating harmonization that encourages cross-border collaboration. Some see MiCA as a genuine opportunity for European and euro stablecoins to readjust the balance of power with dollar stablecoins long term.
Despite some short-term disruption, EU's new crypto regulations' concentration on market integrity and investor protection could be a role model for other markets. There may also be new players in the stablecoin sector to challenge the dominance of dollar-backed stablecoins.
Catalini concurs that while MiCA isn't flawless, it's a good starting point for stricter stablecoin regulation. It's also an improvement on the current situation in the US where new rules are needed for stablecoins to be safe for consumers and businesses.
Published At
3/29/2024 4:01:00 PM
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