Regulation
Restrictive EU stablecoin rules come into force on June 30, issuers are running out of time
Tether, Circle and other big names stable currency issuers will soon be kept under strict control in the European Union.
With the new rules coming into force on June 30, they will not only require proper authorization to operate in the 27-nation trading bloc, but will also face strict limits on transaction numbers and values set out in the Markets in Crypto Asset (MiCA ) legislation.
The regulations mean some of the largest stablecoin issuers, including Tether, whose dollar-pegged USDT is the world’s largest by market capitalization, and Circle, responsible for second-place USDC, may be unable to operate in the EU, said Robert Kopitsch, the general secretary of Blockchain for Europe.
“Euro-denominated non-EU stablecoins, if they cross a certain threshold, then you have to stop issuing them and using them, and that creates a problem because 99% of the stablecoin market is in USD,” Kopitsch said on the sidelines. of CoinDesk’s Consensus 2024 conference held in Austin, Texas last month.
MiCA is the comprehensive package of EU rules for the cryptocurrency industry. It it was voted into law last year and allows companies authorised by one member state to operate across the bloc.
According to the law Article 23companies must stop issuing asset-backed stablecoins that are used as a medium of exchange for more than 1 million transactions or a value of more than €200 million ($215 million) per day. The stablecoin rules will come into force at the end of the month, with the other provisions due to come into force in December.
Blockchain for Europe and the Digital Euro Association – a think tank – have tried fight the measures in a 2022 letter claiming it had effectively banned large stablecoin issuers.
An EBA spokesperson told CoinDesk that the provisions do not prevent companies from issuing stablecoins denominated in non-euro assets. The key is whether they are used as a medium of exchange, to pay for goods or services. In this case, specific limits apply.
Issuers can serve Europeans without limitations when tokens are not a medium of exchange, Jón Egilsson, co-founder of Monerium said in a statement. This includes transactions between currency areas, peer-to-peer transactions and exchanging a cryptocurrency for an electronic money token, she said.
While the EBA has yet to clearly define how it will measure these values, a suggests the consultation document that transactions with both parties based outside the EU may be excluded, but any transaction with at least one party in the EU may be counted.
According to the consultation, a transaction includes both on-chain and off-chain transfers. Movements between addresses or accounts of the same person do not constitute a transaction.
A final report on how the EBA will measure transactions is likely by the end of the month, a spokesperson told CoinDesk.
Companies that have had to suspend emissions will have to submit a plan demonstrating they can meet the limits before being reinstated. It might be difficult: USDT’s daily global trading volume is approx 27 billion dollars according to CoinGecko data. The USDC one is $5 billion.
Another obstacle is obtaining the necessary certification.
“When you are a stablecoin issuer at the European level you have to have an electronic money institution license or a banking license, which is a long and very expensive process,” Kopitsch said.
So Tether, Circle and other issuers have just three days to obtain an e-money license to operate legally.
Circle that has conditionally registered as a Digital Asset Service Provider with the French Financial Markets Authority in April, aims to obtain an electronic money license by the deadline, a company spokeswoman said.
“Circle is committed to full compliance with EU MiCA regulations. We intend to transfer EURC to the EU and issue it from Circle France in a MiCA-compliant manner,” the spokesperson said. “We also intend to issue USDC to our EU-based clients from the same entity in compliance with MiCA and subject to regulatory approval.”
EURC is the company’s euro-backed stablecoin. The equivalent of Tether is EURT. Earlier this week cryptocurrency exchange Bitstamp has removed the Tether tokenquoting MiCA. OKX delisted USDT in March, saying it wanted to focus on euro-denominated liquidity in the region.
“Tether has engaged extensively with its exchange counterparts in Europe regarding requirements, including those related to the ongoing listing of USDT and other Tether tokens, and the interpretation of key regulatory provisions,” said Paolo Ardoino, Tether CEO, in a statement. “While Tether is optimistic about the implementation of MiCA, it remains critical that the stablecoin regulatory policies adopted are balanced, protect consumers, and foster growth in our emerging industry.”
“The question is what happens next because there is a growing awareness that a solution is needed,” Kopitsch said of the restrictive nature of stablecoin rules.