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event 27 May 2024

All about Markets in Crypto-Assets Regulations (MiCAR)

EURR
Regulations
Stablecoins

 

The conception of cryptocurrency represents a new era of decentralized finance for consumers, a profitable avenue yet plagued with a lack of regulation. In Europe, this is no longer the case, as the European Parliament and European Council introduced Markets in Crypto-Assets Regulations (MiCAR), a world-first crypto regulation that provides more certainty and protection for investors and consumers across the European Union. 

These regulations were first approved in June 2023. For stablecoins, MiCAR comes into full effect on July 1st, 2024, and for crypto asset service providers (CASPs), MiCAR is fully established in December of 2024. Under MiCAR, cryptocurrency service providers must comply with certain rules and may need a license to operate in the EU. For euro-denominated stablecoins, such as EURR, MiCAR represents an opportunity to redefine the digital finance landscape. However, some big players, such as Tether (USDT), have announced they will not be governed under MiCAR, and thus will exit the EU market.

Read on to learn more about how MiCAR will impact crypto issuers, consumers, and the future of decentralized finance in Europe and the world.       

 

Scope

MiCAR affects crypto-assets that fall outside existing regulations and do not qualify as financial instruments. This includes cryptocurrencies such as Bitcoin and Ethereum, euro-based stablecoins and non-euro stablecoin issuers who wish to operate in the EU, and other assets that are not categorized as securities or electronic money. As such, MiCAR has a direct impact on stablecoin issuers, such as StablR, and crypto service providers, such as exchanges. 

MiCAR and stablecoin issuers

Providers of crypto assets must disclose all relevant details concerning said assets and publish this information via a white paper. Furthermore, they must explain to regulatory bodies why certain crypto assets cannot be classified as financial instruments under MiFID II. Following this, national competent authorities (NCAs) are responsible for reviewing and approving the white paper. 

Following this, only stablecoins licensed as e-money tokens denominated in an official currency of the EU, such as the Euro, can be issued unlimitedly after the first of July. 

MiCAR and crypto service providers

To operate within the EU, crypto asset service providers (CASPs) like brokers, exchanges, and ‘custodian wallet providers’ need licensing known as the ‘EU passport,’ granted by NCAs. While requirements differ for each CASP, MiCAR mandates prudential standards and governance rules for all, overseen by NCAs. The European Banking Authority (EBA) will create guidelines and enforce decisions. ESMA will maintain a public registry of non-compliant crypto asset service providers.

 

Opportunities for euro-denominated stablecoins

Under MiCAR, the EU are stringent on stablecoin issuers meeting the following requirements:

  • Have a registered office in the EU
  • Build up a sufficiently liquid reserve, with a 1/1 ratio and partly in the form of deposits;
  • Offer every stablecoin holder a claim at any time and free of charge, with the rules governing this reserve also providing adequate minimum liquidity.

MiCAR opens up growth opportunities for Euro-denominated stablecoins such as EURR. Tether’s retreat broadens a pathway for them to provide a compliant, transparent, and dependable digital currency alternative for European users and enterprises. 

The arrival of MiCAR promises to deliver clarity and assurance to the market, possibly stimulating a transition towards stablecoin solutions with a regional focus. The rigorous criteria established by MiCAR could establish a fresh benchmark for trustworthiness and dependability within the stablecoin industry. With more protection and transparency, investors and consumers can confidently enter the crypto market, bringing new potential for stablecoins to redefine the digital finance landscape. 

 

Our take on MiCAR

On the introduction and application of MiCAR, Gijs op de Weegh, StablR’s CEO, commented:

“MiCAR creates an opportunity to grow the crypto industry into mainstream adoption with more integration between crypto assets and traditional finance. For Stablecoins the market in Europe at regulated European exchanges will likely change from a USD denominated into a EUR denominated market which is a huge opportunity for us.”

In the future, MiCAR presents a fascinating opportunity for TradFi to reap the benefits of blockchain technology through cryptocurrencies. The future is looking bright for non-USD stablecoins such as EURR. You can read the full text about the regulations on the EUR-Lex website.

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