The crypto-currency landscape within the European Union (EU) is about to undergo a significant transformation with the entry into force of the Regulation of Crypto-Asset Markets (MiCA). This new legislation aims to establish uniform rules for crypto-assets in the EU, affecting stablecoins and crypto asset service providers in particular.
Short-term effects of MiCA regulations
Psychological stabilization and legitimacy
The introduction of MiCA will bring increased legitimacy to the cryptocurrency sector in Europe. As Reinis Znotins, Executive Director of the Latvian Blockchain Association, pointed out, one of the first consequences will be psychological. Doubts about the legitimacy of cryptocurrency-related businesses within the EU will begin to disappear. Previously, various players questioned whether these businesses had a future in highly regulated environments like the EU.
Market Disruption and Exit of Non-Compliant Stablecoins
John Egilsson, former Chairman of the Supervisory Board of the Central Bank of Iceland and co-founder of Monerium, mentioned that MiCA brings regulatory clarity but also market disruption. Crypto asset service providers (CASPs) will have to comply with these new standards, which could result in the delisting of non-compliant stablecoins as early as June 30. Already, platforms such as Uphold, Bitstamp, Binance, Kraken and OKX have begun withdrawing stablecoins such as Tether USDT.
Potential Growth of the Stablecoin Market
Despite these restrictions, Laura Chaput, Head of Regulatory Compliance at Keyrock, noted that the stablecoin market could grow, with retail investors gaining confidence thanks to increased regulatory protections. Euro-backed stablecoins could see increased demand in European markets.
Implications for Businesses and Users
EU Crypto Companies
For crypto companies in the EU, it’s crucial to keep abreast of new regulations and any last-minute changes. The priority will be to obtain the appropriate authorizations, which include strict organizational, governance and capital requirements. Stablecoin issuers already authorized as e-money institutions will have to revise some of their operations and safeguard procedures, but without any fundamental changes to their operations.
Chaput also pointed out that this new regulation could pave the way for established financial institutions to enter the stablecoin market. At the same time, some companies could attempt regulatory arbitrage by relocating or trying to take advantage of reverse solicitation principles.
EU Cryptocurrency users
Cryptocurrency users in the EU need to prepare for an evolving ecosystem with less access to certain assets but greater transparency on how these tokens work. New consumer protection measures, such as guaranteed redemption rights for holders of electronic money tokens (EMTs), aim to provide a safer environment for investors.
However, some users may be tempted to trade on non-EU platforms to access a wider range of tokens, exposing themselves to less regulated environments with fewer protections.
