The EU crypto regulation, Markets in Crypto Assets (MiCA), heralds a new era for an industry that will provide access to about 18% of global crypto transaction volumes.
In an effort to create a framework across all European Union (EU) member states, MiCA mandated that from June 30 onwards, all stablecoin issuers hold an Electronic Money Institution (EMI) license. It imposed stringent compliance requirements on exchanges.
Some exchanges have adjusted their offerings to include only stablecoins that meet the EU crypto regulations. They want to maintain access to a potential market of 200 million plus when MiCA is fully applied by year’s end.
MiCA is part of the EU’s digital finance package designed to mitigate against crypto risks. It applies to crypto assets not covered by existing financial legislation, specifically stablecoins and crypto asset service providers.
This “is a huge milestone,” CEO of Circle, Jeremy Allaire, said. It brings” digital currency into mainstream scale and acceptance,” he said.
Crypto Market Cap YTD, source: TradingView
EU Crypto Regulation Prompts Crypto Exchanges, Stablecoin-Issuers Response
In response to MiCA, California-based exchange Coinbase 
COIN will delist unauthorized stablecoins that do not comply with MiCA.
“We intend to restrict the provision of services with stablecoins that do not meet the MiCA requirements,” Brian Armstrong, Coinbase CEO, told CoinDesk on October 11.
Binance, the largest global cryptocurrency exchange, announced in early June that it won’t delist any unauthorized stablecoins on the spot. But it will limit their availability for European users “only on certain products,” it said.
PayPal 
PYPL issued its own regulated stablecoin, PayPal USD (PYUSD), through Paxos on August 7, 2023. PayPal operates under an EU banking license in Luxembourg, which grants it business access to the region under EU law.
Circle, the issuer of USDC and EURC, secured an EMI license. It did so under France’s banking regulator, the Autorité de Contrôle Prudentiel et de Résolution. USDC has surpassed USDT by over 10% year-to-date.
USDC vs USDT Crypto Market Cap YTD, source: TradingView
EU Crypto Regulation Heavy On Consumer Protection
MiCA requires digital asset operators to obtain a license in an EEA member state to operate across the EU. Issuers of stablecoins with a fixed reference to a fiat currency, called E-money Tokens, must hold at least 30% of their funds as bank deposits.
For stablecoins deemed “significant,” at least 60% of fiat reserves must be distributed across multiple institutions. This is based on criteria like market cap, user base, and transaction volume.
The EU crypto regulation requires stablecoin issuers to disclose detailed information about their reserve assets and adhere to liquidity. They must maintain capital standards and ensure consumer protection.
For example, stablecoins must be backed by a liquid reserve with a 1/1 ratio and partly by deposits.
EU Crypto Regulation Demands Risk Disclosures
Additionally, MiCA mandates the publication of white papers detailing potential risks and impacts for crypto-assets. It also demands detailed disclosures of reserve assets.
MiCA imposes usage caps on foreign currency EMTs, such as USDC and USDT, limiting them to 1 million daily transactions or €200 million in daily transaction value within the EU.
These measures could lead to broader adoption and integration into traditional financial systems.
But the EU crypto regulation introduces complexities that could stifle smaller market players due to increased operational costs and compliance burdens.
Tether, which has long been criticized for lacking transparency and reserve management, has criticized MiCA. They “could not only render the job of a stablecoin issuer extremely complex but also make EU-licensed stablecoins extremely vulnerable and riskier to operate,” CEO Paolo Ardoino told crypto research portal The Block in early June.
Tether has not yet secured the EMI license. However, it “is developing a technology-based solution” “to serve the necessities of the European market.”
US Crypto Industry Fragmented Compared To EU Regulation
The regulatory approach to cryptocurrencies remains fragmented across the Atlantic, with different states and federal agencies imposing varying rules. The US has yet to implement a comprehensive framework.
Discussions around stablecoin regulation and central bank digital currencies (CBDCs) are ongoing. This disparate regulatory environment creates uncertainties for crypto businesses operating across jurisdictions, including Coinbase, Kraken and Bitstamp.
The regulatory approach in the US in 2023 has resulted in an increase in euro-dominated trading volumes at a faster pace than the dollar.
Source: Kaiko Research, The State of the European Crypto Market, 2023
Notably, the euro leads the dollar in cryptocurrency trading as only 1% of transactions were completed using stablecoins versus 90% in the US.
Access To The European Market
The opportunity for big crypto players is immense. The market size of European cryptocurrency exchanges is projected to grow to $14.3 billion this year. It reach 218.6 million users by next year,
Coinbase’s international business, which includes Europe, contributed approximately 17% of its total revenue in Q1 2024. By aligning with MiCA, Coinbase can leverage its regulatory approach within Europe and potentially increase its regional revenue share through derivatives in Europe.
Coinbase’s strong foundation with USDC, Circle’s MiCA-compliant stablecoin, positions the company to benefit from the regulatory environment in Europe.
The world’s biggest tech companies have been waiting for regulatory clarity to integrate crypto. With MiCA, “they’re all hoping that it happens in the U.S. as well,” Armstrong said. “We’re bullish on this.”
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