Will MiCA Regulations Reshape the Euro-Denominated Stablecoin Market?

YEREVAN (CoinChapter.com) —  JPMorgan analysts anticipate increased adoption of euro stablecoins following the implementation of the EU’s MiCA regulations on Dec․ 30, 2024. Currently, euro-denominated stablecoins represent just 0.12% of the global stablecoin market. The new framework is expected to drive financial institutions and banks in Europe to utilize euro stablecoins for blockchain-based settlements and customer transactions.

Nikolaos Panigirtzoglou, who led the report, stated that MiCA-compliant stablecoins will be prioritized for trading pairs in regulated EU markets. Consequently, exchanges across the EU will adjust their offerings to align with the MiCA regulations.

Prominent examples of euro-pegged stablecoins include Societe Generale’s EURCV and BBVA’s planned stablecoin developed with Visa. Both projects reflect growing institutional interest in compliant stablecoins.

MiCA’s Impact on Global Stablecoin Issuers

The MiCA regulations require stablecoin issuers to secure licenses within the EU and maintain adequate reserves in European institutions. Non-compliant stablecoins are already facing challenges. For instance, Coinbase recently delisted Tether’s USDT, citing concerns over its compliance with MiCA rules.

Circle’s EURC has gained traction under the new regulations due to its compliance, while Tether’s EURT has struggled to meet the standards. Despite these difficulties, Tether remains a significant player in the global stablecoin market, particularly in Asian markets where regulatory demands are less stringent.

To maintain its presence in the EU, Tether has invested in MiCA-compliant platforms such as Quantoz Payments and StablR, a European stablecoin issuer. These moves signal efforts by non-compliant issuers to adapt to the stricter regulatory landscape.

MiCA’s Ban on Algorithmic Stablecoins

The MiCA regulations have banned algorithmic stablecoins, excluding them from the asset-referenced token (ART) classification. These stablecoins lack the required reserves tied to conventional assets, which is a key compliance requirement under MiCA.

The framework mandates that stablecoins maintain a 1:1 liquid reserve ratio. Issuers must also seek authorization before offering or listing electronic money tokens (EMTs) or ARTs in the EU. This includes publishing an approved whitepaper and meeting the criteria set by EU authorities.

The European Banking Authority (EBA) may classify issuers as “significant” based on specific criteria, subjecting them to stricter oversight. These rules are designed to protect the EU’s financial stability and monetary sovereignty.

Growing Institutional Interest in Euro Stablecoins

As MiCA enforces clear compliance guidelines, institutions like Societe Generale and BBVA are leading efforts to integrate euro stablecoins into their operations. These regulations aim to promote trust in the EU’s financial markets while enhancing the adoption of euro-denominated stablecoins.

By ensuring compliance, MiCA regulations may gradually expand the market share of euro-pegged stablecoins, particularly through institutional use. The framework emphasizes financial stability while fostering a regulated environment for blockchain innovations.

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