How the new EU regulation will affect the global cryptocurrency market

From the beginning of July, cryptocurrency exchanges and stablecoin issuers will operate in the EU under the rules set out in the MiCA law.

The entry into force of the Crypto-Asset Markets (Not) the law of June 30 brings significant changes for the cryptocurrency sector in the EU. One of the key provisions of MiCA is regulation stable coinsas well as rules for a wide range of cryptocurrencies and trading platforms.

What MiCA says

MiCA is a regulatory framework that clarifies and uniformly regulates the cryptocurrency market. Defines the classification of digital assets and specifies laws and areas of responsibility for their implementation.

Last April, members of the European Parliament voted in favor of the MiCA cryptocurrency regulation bill. The EU has become one of the first jurisdictions in the world to introduce comprehensive cryptocurrency regulation.

Firms will have to provide full disclosure to customers, present a public business model, establish an effective governance system, including risk management, register with the European Banking Authority (EBA), establish a buy-back mechanism and have sufficient reserves.

Additionally, asset-based token (ART) and electronic money (EMT) issuers will be required to disclose sustainability information starting June 30, while crypto service providers will have to start requiring disclosure requirements by the end of the year.

ART issuers (other than credit institutions) may continue to operate if tokens were issued before 30 June, until they obtain or are denied authorization under MiCA, provided they apply for authorization until 30 July.

Entities that do not comply with the MiCA may be fined and banned from operating in the European Union.

What restrictions have crypto companies introduced?

Due to the introduction of MiCA legislation in the EU, some cryptocurrency companies have started to restrict the use of stablecoins.

In March, OKX suspended trading in the largest stablecoin, Tether (USDT), for users located in the European Union.

In early June, the Binance exchange announced that it would limit access to unregulated stablecoins for customers in the European Union. Binance will also limit the number of services that may involve unregulated stablecoins. The copytrading service and participation in the Launchpad and Launchpool programs will not be available at all to customers of European exchanges.

Cryptocurrency exchange Bit stamp said it will delist EURT, Tether’s euro-pegged stablecoin, and other stablecoins that do not comply with new EU cryptocurrency laws by June 30.

Furthermore, the European company Lugh announced that it will stop issuing its EURL stablecoin before the MiCA regulation comes into force.

State of the Stablecoin Market

Second CoinGeckoDuring 2023, the EURT stablecoin rapidly lost popularity in the European crypto community. In October last year, the cryptocurrency’s capitalization fell almost tenfold from its 2022 peak, from $231 million to $32 million.

Source: CoinGecko

EURT is the second largest euro-pegged stablecoin by capitalization. Compared to Tether’s own USDT, the volume of EURT in circulation is small: just 32.1 million coins as of June 26.

Second a report According to analytics firm Kaiko, euro-backed stablecoins account for just 1.1% of the total trading volume of fiat-backed stablecoins.

Source: Kaiko

The study also shows that the majority (90%) of stablecoin transactions are in assets backed by US dollars. Only 10% of stablecoins are backed by reserves in other currencies and real assets, including gold.

The weekly trading volume of dollar-denominated stablecoins such as USDT exceeds $270 billion. Meanwhile, the total turnover of euro stablecoins EURT, EURS, EURCV, AEUR and similar only amounts to around $40 million per week. However, analysts expect growth in this segment as European regulators pressure exchanges to remove dollar assets from circulation.

What the experts say

Analyst MartyParty generally predicts a stablecoin explosion after the implementation of MiCA. He believes that European Union banks, institutions and stablecoin issuers will begin minting trillions of euro-backed stablecoins in July.

Alexander Ray, CEO and co-founder of Albus Protocol, Notes that the new regulations will require all organizations involved in commercial transactions using asset-linked tokens to implement numerous regulatory measures, such as K.Y.C. AND LAMalga protocols.

He said that the implementation of KYC and AML protocols will definitely increase the operating costs of crypto companies, and ultimately, users will pay the consequences.

Sven Mohle, Managing Director of BitGo Europe GmbH, added that with the adoption of MiCA, Europe is helping to set the bar for promoting international standards in rules and regulations relating to the fight against money laundering and terrorist financing. However, users are unlikely to see fully standardized international norms across all industries.

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