How New EU Regulation Will Affect the Global Cryptocurrency Market

From the beginning of July, cryptocurrency exchanges and stablecoin issuers will operate in the EU in accordance with the rules provided for by the MiCA law.

The entry into force of the Cryptoasset Markets (Mica) the June 30 law means significant changes for the cryptocurrency industry in the EU. One of the key provisions of MiCA is to regulate stable coinsas well as rules for a wide range of crypto assets and exchange platforms.

What MiCA says

MiCA is a regulatory framework that uniformly clarifies and regulates the cryptocurrency market. It 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 regulations on crypto assets.

Firms will have 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 buy-back mechanism and have sufficient reserves.

Additionally, issuers of asset-linked tokens (ART) and electronic money tokens (EMT) must disclose sustainability information starting June 30, and cryptocurrency service providers must begin filing for disclosure requirements by the end of the year.

ART issuers (except credit institutions) can continue operating if the tokens were issued before June 30th, until they receive authorization from MiCA or not, as long as they apply for permission by July 30th.

Entities that fail to comply with MiCA may be fined and prevented from operating in the European Union.

What restrictions have cryptocurrency companies introduced?

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

In March, OKEx suspended trading of the largest stablecoin, Tether (USDT), for users located in the European Union.

In early June, the Binance The exchange announced that it would limit access to unregulated stablecoins for customers in the European Union. Binance will also limit the number of services that can involve unregulated stablecoins. Copytrading services and participation in the Launchpad and Launchpool programs will be completely unavailable to European exchange customers.

Cryptocurrency exchange Bitstamp said it will delist EURT, the euro-pegged stablecoin Tether, and other stablecoins that do not comply with the EU’s new crypto laws by June 30.

Additionally, European firm Lugh announced that it would stop issuing its EURL stablecoin before MiCA regulation comes into effect.

State of the Stablecoin Market

According to CoinGeckoThroughout 2023, the EURT stablecoin quickly lost its popularity in the European crypto community. In October last year, the crypto asset’s capitalization fell almost tenfold compared to its peak in 2022 — from $231 million to $32 million.

Source: CoinGecko

EURT is the second largest euro-pegged stablecoin by capitalization. Compared to the USDT of the same Tether, the volume of EURT in circulation is small – only 32.1 million coins as of June 26.

According to a report from analytics firm Kaiko, stablecoins backed by euro reserves represent just 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 US dollar-backed assets. Only 10% of stablecoins are backed by reserves in other currencies and real assets, including gold.

The weekly trading volume of dollar stablecoins such as USDT exceeds $270 billion. Meanwhile, the total turnover of euro stablecoins EURT, EURS, EURCV, AEUR and similar is only $40 million per week. However, analysts expect growth in this segment, as European regulators pressure exchanges to remove dollar assets from circulation.

What the experts say

Analyst MartyParty generally expects a stablecoin boom following the implementation of MiCA. He believes that banks, institutions, and stablecoin issuers in the European Union will start minting trillions of euro-backed stablecoins in July.

Alexander Ray, CEO and co-founder of Albus Protocol, grades that the new regulations will require all organizations involved in commercial transactions using asset-linked tokens to implement many regulatory measures, such as KYC It is LMA protocols.

He said that the implementation of KYC and AML protocols will certainly increase the operating costs of crypto companies, and users will end up paying for it.

Sven Mohle, Managing Director of BitGo Europe GmbH, added that, with the adoption of MiCA, Europe is helping to set the standard for promoting international standards regarding rules and regulations related to combating money laundering and terrorist financing. However, users are unlikely to see fully standardized international rules at all levels.

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