MiCA Enters Force: Transforming the EU and Global Crypto Markets

From July, crypto exchanges and stablecoin issuers in the EU must adhere to the Markets in Crypto-Assets (MiCA) law, signaling substantial changes in the industry.

Overview of MiCA

The MiCA law, effective from June 30, represents a significant milestone for the cryptocurrency sector in the European Union. Its provisions include stringent regulations for stablecoins and comprehensive rules for various crypto assets and trading platforms.

Framework and Compliance

MiCA offers a regulatory framework that clarifies and standardizes cryptocurrency market operations within the EU. This legislation delineates digital asset classifications and specifies the legal responsibilities for their implementation.

In April, the European Parliament approved MiCA, making the EU one of the first jurisdictions globally to introduce comprehensive crypto asset regulations. Companies are now required to ensure full disclosure to customers, present transparent business models, establish effective governance and risk management systems, register with the European Banking Authority (EBA), maintain sufficient reserves, and implement buyback mechanisms.

Additionally, issuers of asset-related tokens (ART) and electronic money tokens (EMT) must disclose sustainability information from June 30. Crypto service providers must begin adhering to disclosure requirements by the year’s end. ART issuers, excluding credit institutions, may continue operations if tokens were issued before June 30, pending MiCA authorization, provided they apply for permission by July 30.

Non-compliance with MiCA will result in fines and operational bans within the EU.

Industry Response and Restrictions

In response to MiCA, several crypto firms have imposed restrictions on stablecoins. In March, OKX suspended Tether (USDT) trading for EU users. Binance, in June, announced limits on access to unregulated stablecoins for EU customers and restricted certain services involving these assets, including copy trading and participation in Launchpad and Launchpool programs. Bitstamp plans to delist the euro-pegged stablecoin EURT and other non-compliant stablecoins by June 30. Furthermore, European company Lugh will cease issuing its EURL stablecoin ahead of MiCA’s enforcement.

Stablecoin Market Analysis

Data from CoinGecko indicates that EURT lost significant popularity in 2023, with its market capitalization dropping from $231 million to $32 million by October. EURT remains the second-largest euro-pegged stablecoin by capitalization, with only 32.1 million coins in circulation as of June 26. According to Kaiko, euro-backed stablecoins represent just 1.1% of the total trading volume of fiat-backed stablecoins. Most transactions (90%) involve U.S. dollar-backed assets, while other currencies and real assets, including gold, back only 10% of stablecoins.

The weekly trading volume for dollar stablecoins like USDT exceeds $270 billion, whereas euro stablecoins such as EURT, EURS, EURCV, AEUR, and others have a total turnover of about $40 million per week. Analysts anticipate growth in the euro stablecoin segment as European regulators pressure exchanges to reduce dollar assets in circulation.

Expert Opinions

Analyst MartyParty predicts a surge in stablecoin issuance post-MiCA, expecting European banks, institutions, and issuers to mint trillions of euro-backed stablecoins starting in July. Alexander Ray, CEO and co-founder of Albus Protocol, highlights that new regulations will mandate extensive KYC and AML measures, increasing operational costs for crypto firms, which users will ultimately bear.

Sven Mohle, managing director of BitGo Europe GmbH, remarks that MiCA sets a high standard for international anti-money laundering and counter-terrorism financing regulations. However, he notes that fully standardized global rules remain unlikely.

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