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event 20 June 2024

Will MiCAR Drive USD Stablecoins Out Of Europe?

Regulations
Stablecoins

Markets in Crypto Assets regulations (MiCAR) are set to challenge the domination of USD stablecoins, according to experts. Euro stablecoins are set to thrive in this new climate, while USD stablecoin issuers will have to navigate the EU legal landscape to survive. Will this lead to a mass exodus of USD-backed stablecoins in Europe? Read on to find out. 

 

What does MiCAR entail?

In a previous article, we’ve detailed the full scope of MiCAR and how it relates to stablecoin issuers worldwide. In short, MiCAR gives a clearer distinction between what can be considered a digital asset versus other forms of e-money. Thus, it requires crypto assets and service providers to comply with existing EU laws. Moreover, MiCAR will require the following:

  • Issuers need to have a registered legal entity within the EU
  • Issuers must provide clear whitepapers on their assets, which have to be vetted by national competent authorities
  • Crypto assets service providers (CASPs) such as exchanges will need licenses to operate within the EU

These are some of the most important regulations affecting crypto issuers and service providers. In turn, EU consumers will enjoy more protection and assurance. MiCAR is set to come into full effect in July 2024, and crypto issuers are gearing up for it. 

See also: What is MiCAR and how will it affect the stablecoin market?

 

Euro stablecoins on the rise

The stablecoin market is dominated by USD-backed tokens such as USDT (Tether) or DAI (Dai). With MiCAR on the way, this could change, mainly for the volume and prevalence of Euro stablecoins. MiCAR requires most Euro stablecoins to provide transparency, clarity, and consumer protection. Compared to the pending political battles and regulatory uncertainties in the US, Euro stablecoins are more favorable for investors. 

Experts have speculated that this might lead to more USD stablecoins being delisted in the EU. However, some issuers have taken steps to remedy this. Circle has reportedly applied for an e-money institution license in France. Others have not taken to this news well. Tether USDT is set to leave the EU, with one of the largest exchanges, OKX, already delisted this coin. Therefore, it is unclear whether there will be a mass exodus of USD stablecoins from the European Union. 

For Euro stablecoin issuers, such as Stablr EURR, MiCAR represents an opportunity to tap into the EU banking market. Euro stablecoin issuers are more or less ready for this change, even if it means more frequent reporting under more stringent laws. In the long run, we could see more widespread adoption of Euro stablecoins in the world, and more integration between traditional finance and crypto assets in Europe. 

 

Experts opinions

As with all crypto-related matters, experts are sharing their thoughts on what MiCAR could mean for the survival of USD stablecoins in the EU and worldwide. 

More and more people are welcoming MiCAR as a step in the right direction for the stablecoin/crypto market. 

MiCA is a meaningful step forward — even if the new rules are far from perfect — and will encourage entry into the market by a number of new Euro stablecoin issuers. – Professor Christian Catalini of the MIT Cryptoeconomics Lab

A landmark that would put an end to the crypto Wild West – Bruno Le Maire, France’s Finance Minister

An opportunity to grow the crypto industry into mainstream adoption – Gijs op de Weegh, CEO of StablR

 

Other experts voiced their reservations.

..It could result in increased compliance costs, barriers to market entry, and potential conflicts with other jurisdictions’ regulatory frameworks, resulting in policy fragmentation – Jean-Baptiste Graftieaux, global CEO at France’s Bitstamp cryptocurrency exchange

If the relatively unfettered use of stablecoins is permitted in other jurisdictions, this could adversely impact the crypto market in the EU. – Rachel Cropper-Mawer, Partner at law firm Clyde&Co

However, it should be noted that the overall sentiment towards MiCAR has been largely positive.

 

A possible new era in the stablecoin market

Undoubtedly, MiCAR has been one of the most talked about developments in the crypto world. As one of the first large-scale crypto regulations, MiCAR is set to create ripples, especially in the stablecoin market. Most Euro stablecoin issuers are looking forward to the full implementation of MiCAR, while USD stablecoin issuers scramble to protect their dominance. 

While there are only predictions on the future of stablecoins after crypto, one thing is certain: Euro stablecoins are set to embrace a hyper-growth era, and consumers can expect to profit from this growth.

Our insight of the stable coin world

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