June 10, 2024|Commentary

What We See in the Markets: Impending MiCA Regulations


Let’s talk about Europe.

On June 30th, Europe’s crypto-asset regulation framework, MiCA, will go into effect for asset-referenced tokens, the categories which could cover stablecoins (some stablecoins are likely to be covered by the e-money token category; rules for this group go into effect on June 30 as well). This has the potential to be extremely impactful, as most of the well-known stablecoins seemingly do not currently qualify as authorized ARTs or e-money. This primarily impacts exchanges and their customers, and we’ve already seen exchanges planning for the change. In March, OKX announced that Tether would be delisted for European customers, and last week Binance announced that it would restrict “unauthorized” stablecoins for EU customers, though it didn’t specify which stables would be impacted, and it also laid out a phased approach. It’s important here to note that USDT is not the only stablecoin which could potentially be considered "unauthorized" under MiCA… USDC, DAI, and FDUSD could fall into this category as well, at least as of today.

We are on the record as thinking that non-USD stablecoins would gain market share over the long-term, and we highlighted regulatory clarity as being a potential catalyst for that shift. MiCA coming into effect could be the starting pistol for the shift. Exchanges in Europe will likely begin listing licensed stablecoins out of regulatory necessity, and these stables will initially be EUR-based. Bitstamp, which was acquired last week by Robinhood, seems particularly likely to move in this direction; along with Kraken and Coinbase, they have the best-established EUR onramps. At the end of the day, monetary regulators are likely to want their populations transacting in their local currencies. A growth of EUR stables could be very likely to lead to exchanges in other regions prioritizing stablecoins in their own currency. We see similar trends taking place in other regions, such as Hong Kong, where a regulatory sandbox was recently established to explore HKD stablecoins. Even in the US, the stablecoin legislation which seemed unlikely a few months ago now seems to be back in play, garnering support from both sides of the aisle.

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