Circle becomes the first stablecoin issuer approved by the EU MiCA regulations
On July 1, 2024, Jeremy Allaire, the co-founder and CEO of Circle, announced that Circle has become the first stablecoin issuer in the EU to receive approval under the Markets in Crypto Assets Regulation (MiCA).
This means that Circle’s stablecoins, USDC and EURC, will be the first fully compliant digital tokens under the crypto asset market regulation. Businesses can now list these tokens legitimately, and investors do not need to redeem or sell their stablecoin assets to comply with regulations.
Stablecoins are a crucial element of the digital asset market infrastructure and are the most commonly used tokens for user transactions and transfers. Currently, Circle’s USDC is the world’s second-largest stablecoin with a market capitalization of $32 billion, while the market leader Tether’s USDT has a market capitalization of $110 billion, showing a widening gap.
By obtaining compliance status in Europe ahead of others, Circle has a significant opportunity to surpass USDC’s competitors.
Considering France’s forward-thinking approach to digital asset regulation and Circle’s collaboration with the French Prudential Supervision and Resolution Authority (ACPR), Circle has chosen France as its European headquarters.
Allaire stated, “The concept of fiat-backed digital currencies was almost non-existent in the early days of the crypto community. It’s truly remarkable to see major jurisdictions worldwide integrating stablecoins into the financial system.”
The CEO of the largest exchange, Binance, Richard Teng, congratulated Circle and acknowledged that USDC becoming an Electronic Money Token (EMT) compliant with MiCA standards represents a positive step forward for the European Economic Area’s crypto ecosystem. He looks forward to seeing more EMTs compliant with MiCA standards in the near future.
The impact of the MiCA regulations on the stablecoin market
The European Union’s Markets in Crypto Assets Regulation (MiCA) reform is historically significant as it is the first comprehensive regulatory framework for digital assets.
According to the plan, the MiCA regulation will officially come into effect in December 2024.
The implementation of the MiCA regulation poses many challenges for the EU crypto market. MiCA requires stablecoins pegged to fiat currencies to have sufficient liquidity reserves, obtain an Electronic Money License, and mandates exchanges to delist all non-compliant Euro stablecoins, including Tether’s EURT, by June 30.
Most European exchanges have begun taking action to comply. Bitstamp was the first to delist Tether’s EURT stablecoin at the end of June, while crypto exchanges Kraken, Uphold, and OKX have started delisting Tether’s USD and EUR stablecoins. Binance has taken a more moderate approach, adopting a “sell-only” strategy for certain stablecoin products in the European market.
Former Supervisor of the Central Bank of Iceland, Jón Egilsson, mentioned in an interview with the media outlet Cointelegraph that non-compliant stablecoin issuers may completely exit the EU market, leading to a shift towards Euro-backed stablecoins as demand in the European market increases.
The implementation of the EU MiCA regulations and Circle’s pioneering status mark a significant milestone for the digital asset market. It not only demonstrates the increasing importance of digital assets in the global financial system but also reflects the efforts of regulatory authorities to protect investors and maintain market stability.
With changing regulatory environments globally, the crypto market will continue to undergo rapid transformations and adjustments. Market participants will need to adapt continuously to these changes to remain competitive in this dynamic environment.