Tether, Circle and other major stablecoin issuers will soon be in trouble in the European Union.
With the new rules coming into effect 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 the number of transactions and values set by the Markets in Crypto Asset (MiCA). legislation.
The regulations mean some of the biggest stablecoin issuers, including Tether, whose dollar-pegged USDT is the world’s largest by market capitalization, and Circle, responsible for the second-ranked USDC, may not be able to operate in the EU, said Robert Kopitsch, Blockchain’s general secretary for Europe.
“Non-EU, euro-denominated stablecoins – if they cross a certain threshold – you have to stop issuing and using them, and that creates a problem because 99% of the stablecoin market is in USD,” Kopitsch said on the sidelines. from the CoinDesk Consensus 2024 conference in Austin, Texas last month.
MiCA is a comprehensive package of EU rules for the crypto industry. It was voted into law last year and allows companies with a license from one member state to operate in the entire block.
According to the law Article 23, companies must stop issuing asset-referenced stablecoins that are used as a medium of exchange for more than 1 million transactions or a value north of 200 million euros ($215 million) per day. The rules for stablecoins will come into effect at the end of the month, and other provisions are expected to come into effect in December.
Blockchain for Europe and the Digital Euro Association – a think tank – have attempted this fight the measures in a 2022 letter in which they claimed to have effectively banned major stablecoin issuers.
An EBA spokesperson told CoinDesk that these provisions do not prevent companies from issuing stablecoins denominated in assets other than euros. The key is whether they are used as a medium of exchange, to pay for goods or services. If so, specific restrictions apply.
Issuers can serve Europeans without restrictions as long as tokens are not a medium of exchange, Jón Egilsson, co-founder of the company Monerium he said in a statement. This includes transactions between currency areas, peer-to-peer transactions and where cryptocurrency is exchanged for an electronic money token, he said.
Although the EBA has yet to clearly define how it will measure these values, a the consultation document suggests that transactions with both parties located outside the EU may be excluded, but all transactions with at least one party in the EU may be counted.
According to the consultation, the transaction includes both on-chain and off-chain transfers. Transfers between addresses or accounts of the same person are not considered transactions.
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 issuance will have to submit a plan showing they can meet the limits before resuming. This could be difficult: the daily global trading volume of USDT is approx 27 billion dollars according to CoinGecko data. USDC is 5 billion dollars.
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 bank license, which is a very expensive and long process,” Kopitsch said.
So Tether, Circle and other issuers have just three days to secure an e-money license to operate legally.
A circle that has conditionally registered as a Digital asset service provider with France’s financial markets authority in April, aims to obtain an electronic money license by the deadline, a company spokesman said.
“Circle is committed to full compliance with EU MiCA regulations. We plan to move EURCs to the EU and issue them from Circle France in a MiCA compliant manner,” the spokesperson said. “In addition, we intend to issue USDCs to our EU-based customers from the same entity in accordance with MiCA and subject to regulatory approval.”
EURC is the company’s euro-backed stablecoin. The equivalent of Tether is EURT. Earlier this week, the crypto exchange Bitstamp has removed the Tether tokenwith reference to MiCA. OKX removed USDT from the exchange in March it said it wanted to focus on euro liquidity in the region.
“Tether has been in intensive discussions with its exchange counterparties in Europe regarding requirements, including those related to the ongoing listing of USDT and other Tether tokens, and the interpretation of key regulatory provisions,” Tether CEO Paolo Ardoino said in a statement. “While Tether is optimistic about the implementation of MiCA, it remains critical that the regulatory policies adopted for stablecoins are balanced, protect consumers, and support growth in our emerging industry.”
“The question is what happens next because there is a growing realization that there is a need for a solution,” Kopitsch said of the restrictive nature of stablecoin rules.