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) of the law of June 30 brings significant changes to the cryptocurrency sector in the EU. One of the key provisions of the MiCA is the regulation stablecoinsas well as rules for a wide range of cryptocurrencies and exchange 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 became one of the first jurisdictions in the world to introduce comprehensive cryptocurrency regulation.

Companies will need 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 repurchase mechanism and have sufficient reserves.

Additionally, issuers of asset-based tokens (ART) and electronic money (EMT) will have 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 the tokens were issued before June 30, until they obtain or deny authorization under MiCA, provided they apply for authorization until July 30.

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

What restrictions have cryptocurrency companies introduced?

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

In March, OKX suspended trading of the largest stablecoin, Tether (U.S. dollar), for users located in the European Union.

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

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

Furthermore, the European company Lugh announced that it would stop issuing its EURL stablecoin before the MiCA regulation goes into effect.

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, EURT’s circulating volume is small: just 32.1 million coins as of June 26.

Second a report According to analytics firm Kaiko, stablecoins backed by euro reserves account for only 1.1% of the total trading volume of stablecoins backed by fiat currencies.

Source: Kaiko

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

The weekly trading volume of dollar stablecoins like USDT exceeds $270 billion. Meanwhile, the total turnover of euro stablecoins EURT, EURS, EURCV, AEUR and the like is only $40 million per week. However, analysts expect growth in this segment as European regulators pressure exchanges to withdraw 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 anti-money laundering protocols.

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

Sven Mohle, CEO of BitGo Europe GmbH, added that by adopting MiCA, Europe is helping to set the bar for promoting international standards in rules and regulations relating to combating money laundering and terrorist financing. However, it is unlikely that users will see fully standardised international rules across all sectors.

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