The free reign stablecoin issuers had in the European markets is ending on June 30 as the EU’s MiCA (Markets in Crypto Assets) regulations will enforce caps on transaction volumes and value. That means asset-referenced stablecoins not pegged to the Euro, witnessing over a million transactions or facilitating the movement of value over $215 million will need to be discontinued in the bloc.
Transactions considered for the caps will include those conducted for payments of goods and services settled on- and off-chain. Issuers like Tether and Circle will have to strategize their operations in the EU again as their dollar-pegged stablecoins witness massive daily trading volumes amounting to billions of dollars.
Moreover, most stablecoins in the market are pegged to the dollar. So, issuers must reconsider offering their flagship stablecoins in this market and focus on introducing assets pegged to the Euro. The regulation, although tough, is being implemented to prevent the Euro from being devalued by other currencies.
However, issuing Euro-pegged stablecoins is harder than it appears, as issuers in the EU must obtain e-money issuance or banking licenses—an arduous task. Moreover, they must also show regulators that they can limit transaction volumes and value according to the mandate.
While transactions in this context include payments for goods and services, peer-to-peer transactions, buying e-money tokens, and transfers conducted to move value between exchange accounts and wallets held by the same person do not count. Tracking such transfers may pose tremendous hurdles to issuers and restrict them from operating in the bloc.
Nevertheless, Tether intends to operate in the EU, complying fully with MiCA’s demands as soon as the regulation takes effect. It is looking to obtain its e-money license by the end of this month, which is in a few days, and issue its Euro-referenced stablecoin—EURC. It also intends to issue USDC in line with the limits set by MiCA.
