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The MiCA law and its impact on stablecoins: USDT or USDC in Europe?

Jesus Carames

May 16, 2024 | 9:00 p.m.

The imminent regulatory change in the European Union, driven by the Cryptoasset Markets Law (MiCA), has stablecoin issuing companies in its sights. The regulations, which will come into force on June 30, bring with them significant requirements that can transform the landscape of these digital assets in the eurozone.

A paradigm shift for stablecoins in Europe

The MiCA law sets new rules of the game for stablecoins, such as USD Tether (USDT) and USD Coin (USDC). These cryptocurrencies, backed by fiat currencies, are the largest on the market by capitalization volume. However, compliance with the new requirements could cause some companies to reconsider their operation in Europe.

One of the main requirements of MiCA is that stablecoin issuing companies must obtain authorization to operate as credit institutions or electronic money institutions (EMI). This measure seeks to ensure that stablecoins maintain an adequate level of stability and transparency, thus protecting investors and the European financial system.

What stablecoins will be able to operate in Europe?

Tether Limited, the company behind USDT, has not yet obtained the EMI license from the European Union and, according to its CEO Paolo Ardoino, has no intentions of applying for it in the short term. Ardoino has criticized the MiCA guidelines, calling them too restrictive and limiting innovation. Consequently, USDT could be the first stablecoin to go out of circulation in the European Union, at least temporarily.

On the other hand, Circle, the issuing company of USDC, already has the EMI license granted by France in December 2023. This positions USDC as the stablecoin most prepared to operate under the MiCA law, covering the space that USDT will leave in the European market.

Implications of the MiCA law for issuing companies

Stablecoin issuing companies will have to present white papers for their tokens, in accordance with article 51 of MiCA. In addition, they must provide informative data such as the company name, tax address, telephone number and email.

One of the most controversial guidelines is the ban on offering interest on stablecoins. This applies to both issuing companies and cryptocurrency service providers, who will not be able to offer rates of return. Likewise, 30% of stablecoin reserves will be required to be deposited in different banks operating in the EU, which represents a considerable logistical and financial challenge.

Criticism of the new regulations

Paolo Ardoino has been one of the most vocal critics of the MiCA law. According to Ardoino, regulation could stifle innovation in the cryptocurrency sector in Europe. He argues that the restrictions imposed by MiCA do not provide a favorable environment for the development of the cryptocurrency ecosystem. “Europe is rushing to regulate at the risk of stifling innovation,” Ardoino said.

Despite criticism, the MiCA law represents a significant effort by the European Union to regulate the cryptoasset market, providing a legal framework that seeks to protect investors and maintain financial stability. However, the implementation of these regulations also poses significant challenges for stablecoin issuing companies, which will need to adapt quickly or consider exiting the European market.

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