How New EU Regulations Will Affect the Global Crypto 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 (Mica) of June 30 means significant changes for the cryptocurrency sector in the EU. One of the key provisions of MiCA is the regulation stable coinsas well as rules for a wide range of crypto assets and exchanges.

What MiCA says

MiCA is a regulatory framework that clarifies and uniformly regulates the cryptocurrency market. It defines the classification of digital assets and specifies the laws and areas of responsibility for their implementation.

Last April, members of the European Parliament voted in favor of the MiCA bill on the regulation of cryptocurrencies. The EU has become one of the first jurisdictions in the world to introduce comprehensive regulation on crypto assets.

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 buyback mechanism and have sufficient reserves.

Additionally, issuers of asset-linked tokens (ARTs) and electronic money tokens (EMTs) must disclose sustainability information starting June 30, and crypto service providers must begin requesting disclosure requirements by the end of the year.

ART issuers (other than credit institutions) may continue to operate if the tokens were issued before 30 June, until they are granted or refused authorisation under MiCA, provided they apply for authorisation before 30 July.

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

What restrictions have crypto 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, OKX suspended trading in the largest stablecoin, Tether (USDT), for users located in the European Union.

At the beginning of June, the Binance 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 can involve unregulated stablecoins. The copytrading service and participation in the Launchpad and Launchpool programs will be completely unavailable for European exchange customers.

Cryptocurrency Exchange Bit stamp said it would delist EURT, the euro-pegged Tether stablecoin, and other stablecoins that do not comply with new EU laws on crypto assets by June 30.

Separately, European company Lugh announced that it would stop issuing its stablecoin EURL before the MiCA regulation comes into force.

State of the stablecoin market

According to CoinGeckothroughout 2023, the EURT stablecoin has rapidly lost popularity within the European crypto community. In October last year, the capitalization of the crypto asset increased almost tenfold from its 2022 peak, falling from $231 million to $32 million.

Source: CoinGecko

EURT is the second largest euro-pegged stablecoin by market cap. Compared to Tether’s USDT, EURT’s circulating supply is small: only 32.1 million coins as of June 26.

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

Source: Kaiko

The study also shows that most (90%) of stablecoin transactions involve 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 such as USDT exceeds $270 billion. Meanwhile, the total turnover of euro stablecoins EURT, EURS, EURCV, AEUR, etc. is only about $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 an explosion of stablecoins after the implementation of MiCA. He believes that European Union banks, institutions and stablecoin issuers will start minting billions of euro-backed stablecoins in July.

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

He said the implementation of KYC and AML protocols would definitely increase the operating costs of crypto companies and users would ultimately pay the price.

Sven Mohle, Managing Director of BitGo Europe GmbH, added With the adoption of MiCA, Europe contributes to setting international standards for rules and regulations related to the fight against money laundering and terrorist financing. However, users are unlikely to see fully standardized international rules across the board.

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