Regulation
EU to implement strict regulations on stablecoins by end of June
The free reign of stablecoin issuers in European markets ends on June 30 as the E.U. Mica (Markets in Crypto Assets) will impose caps on trading volumes and values. This means that non-euro asset-referenced stablecoins, witnessing more than a million transactions or facilitating the movement of more than $215 million in value, will have to be discontinued in the block.
Transactions affected by the caps will include those made for payments for goods and services settled on and off-chain. Issuers like Tether and Circle will once again have to strategize their operations in the EU, as their dollar-pegged stablecoins see massive daily trading volumes amounting to billions of dollars.
Additionally, most stablecoins on the market are pegged to the dollar. Issuers must therefore reconsider the offering of their flagship stablecoins in this market and focus on the introduction of euro-indexed assets. The regulations, although strict, are implemented to prevent the Euro from being devalued by other currencies.
However, issuing euro-pegged stablecoins is more difficult than it seems, as EU issuers must obtain e-money issuance licenses or banking licenses, a daunting task. In addition, they must also demonstrate to regulators that they can limit transaction volumes and values in accordance with the mandate.
Although transactions in this context include payments for goods and services, peer-to-peer transactions, the purchase of electronic money tokens, and transfers made to move value between exchange accounts and wallets held by the same person are not taken into account. Tracking these transfers can pose huge hurdles for issuers and prevent them from operating in the bloc.
Nevertheless, Tether intends to operate in the EU, fully complying with MiCA requirements as soon as the regulation comes into force. It is looking to obtain its e-money license by the end of this month, in a matter of days, and to issue its euro-referenced stablecoin – EURC. It also intends to issue USDC in accordance with the limits set by MiCA.
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