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On July 1, 2024, stablecoin issuer Circle announced that its France-based unit received an Electronic Money Institution (EMI) license, which will allow the company to issue USDC and EURC stablecoins in a compliant manner across the European Union (EU) region.
Circle is the first stablecoin issuer in the world to comply with the EU’s landmark crypto regulatory framework, the Markets in Crypto-Assets Act (MiCA).
But what does this mean for the stablecoin industry? Let’s find out below.
Key Takeaways
- The first phase of MiCA regulations was passed in June 2023 in the EU.
- On June 30, 2024, MiCA rules to regulate stablecoins went into effect.
- Circle’s USDC and EURC mint and redeem platform called Circle Mint is officially available to business customers across Europe.
- Experts say regulations will create a “comply or vanish” scenario for crypto issuers in Europe.
- Anndy Lian says “decentralization might not be a casualty” of the incoming crypto regulatory wave.
What is the Markets in Crypto-Assets Act (MiCA)?
The MiCA is widely regarded as the world’s most comprehensive law that covers how cryptocurrencies are regulated. The first phase of MiCA regulations was passed in June 2023 in the EU.
On June 30, 2024, MiCA rules to regulate stablecoins went into effect.
Issuers are now required to hold MiCA licenses to publicly offer and trade cryptocurrencies and stablecoins within the EU region.
Under the MiCA rules, issuers are required to stop the issuance of non-euro stablecoins if they exceed a limit of over 1 million stablecoin transactions or if the value of stablecoin transactions exceeds 200 million euros.
Other MiCA compliances require issuers to have an office in an EU country, implement anti-money laundering rules, and disclose risks about issued cryptos, a portion of reserve funds held as bank deposits, among others.
The final phase of MiCA regulations will be implemented by the end of 2024.
Crypto research firm Chainalysis said: “Previously, frameworks focused solely on anti-money laundering and counter-terrorist financing. MiCA aims to unify the currently fragmented regulatory landscape by establishing harmonized rules, providing legal certainty, protecting consumers and investors, and supporting the integrity and stability of the European financial system while fostering innovation.”
USDC Stablecoins for Financial Institutions
Now that Circle is compliant with MiCA’s regulatory obligation for stablecoins, it has opened up a new market for its USDC stablecoin.
Circle’s USDC and EURC mint and redeem platform called Circle Mint is officially available to business customers across Europe.
Institutions will now be able to leverage near-instant settlement, low transaction costs and 24/7 availability of Circle’s stablecoins. Businesses will also be able to provide stablecoin access to their customers through their app or website.
Banks are closed today, but open money is still moving between businesses and across borders 24/7. $USDC is global, frictionless, and open money that can help your business move faster, with no days off. #OpenMoneyEra
— Circle (@circle) June 30, 2024
Incoming Crypto Regulations Means ‘Comply or Vanish’
The landmark stablecoin regulation introduced in Europe points to a future where only compliant stablecoins are considered legal and, therefore, easily accessible to the public through centralized crypto exchanges (CEX).
“Stablecoin offerings, both local and global, will either comply or ultimately vanish from the EU market in the short to mid-term, as evidenced by recent announcements from exchanges like Binance, Bitstamp, Kraken, OKX and others that are either delisting or phasing out non-compliant tokens,” said Circle’s Dante Disprate and Patrick Hansen in a blog post for The Bretton Woods Committee.
The duo added that the stablecoin industry in the EU will consolidate around regulated tokens. They said that the EU crypto market is expected to undergo “a massive transformation” as clear regulations and strong protections increase the EU’s competitiveness to host the next evolution of the crypto industry.
Expert views: Future of Stablecoins and Decentralized Finance
In conversation with Techopedia, Anndy Lian, an intergovernmental blockchain expert, said compliant stablecoins are poised to be a “tipping point” that has the potential to supercharge stablecoin adoption globally.
Lian said:
“Regulations build trust, especially for remittance and dollar exposure, attracting new users. Integration with traditional finance unlocks wider applications for payments and financial products … Challenges remain, but compliant stablecoins have the potential to supercharge global adoption.”
When asked about the future of decentralized finance (DeFi) in the face of inevitable crypto regulations, Lian added that “decentralization might not be a casualty” of the regulations that are currently reshaping the crypto landscape.
“The dream of a decentralized future for cryptocurrencies doesn’t have to be squashed by upcoming regulations. Instead, crypto can adapt and even thrive alongside these new rules.
“Regulations might not extinguish the desire for decentralization, but rather create a parallel, regulated crypto space that coexists with the existing one.”
We also asked Shiven Moodley, chief operating officer and macro strategist at 80eight Group, on his thoughts on stablecoin adoption growth.
Moodley told Techopedia that global stablecoin adoption will depend on how EU economies will push blockchain adoption among trade partners.
“Looking into a stablecoin and the technology around it, these developed market goals around FATF (Financial Action Task Force) and AML(Anti-money laundering) are well suited to improve the transparency of trade and reduce the latency of the SWIFT network of somewhat manual checks in compliance.”
The Bottom Line
The crypto industry is evolving with incoming regulations for the better or worse depending on how you look at it. The MiCA regulations are only the start as more regions including the US are yet to implement crypto rules in their jurisdiction.
One thing is for certain. The MiCA rules will deeply influence how regulations are framed in other nations.
