EU crypto traders urged to convert non-compliant stablecoins to regulated ones as MiCA framework takes effect
Quick Take
- EU stablecoin users are urged to convert non-compliant stablecoins to regulated ones as the bloc’s MiCA regulation goes live.
- The new regulations prohibit stablecoins from exceeding one million daily transactions used to pay for goods or services, whether settled off-chain or on-chain.
The EU's Markets in Crypto Assets (MiCA) regulation for stablecoins has now come into effect, with a stipulation that only regulated stablecoins will be permitted for use within the bloc. The new regulatory framework requires a series of actions for many companies and users wishing to issue or use stablecoins within the EU.
According to YouHodler CEO Ilya Volka, it is now crucial for stablecoin users within the EU to convert non-compliant stablecoins to regulated ones like USDC.
"This conversion ensures maximum stability and will not impact the value of digital assets," Volka told The Block.
Volka added that EU-based investors who hold stablecoins should not move their stablecoins to offshore platforms.
"By staying on a MiCA-compliant platform, users will be protected by the latest market regulations, as using unregulated stablecoins on offshore platforms could be very dangerous as it exposes users to legal and financial risks, including the potential freezing of assets by authorities," the YouHodler CEO added.
Volka stressed that converting unregulated stablecoins to regulated ones will not incur a loss. "For example, when you convert USDT to USDC, your assets will remain the same dollar amount," he added.
Tether 'concerned' by EU's MiCA regulation
In early June, Binance announced it would begin restricting access to "unauthorized" stablecoins in the 27-nation trading bloc by the end of last month. However, Tether CEO Paolo Ardoino expressed concern to The Block regarding MiCA and its impact on stablecoins.
"Tether has been actively involved in regulatory technical standards consultations over the past months and remains concerned that MiCA contains several problematic requirements," Ardoino told The Block.
"These requirements could not only render the job of a stablecoin issuer extremely complex but also make EU-licensed stablecoins extremely vulnerable and riskier to operate. As with any regulatory framework of this scale, further discussions on the technical implementation standards are crucial to providing clarity to the market over certain provisions," he added.
Beyond licensing requirements, MiCA introduces additional uncertainty through its stablecoin issuance restrictions. According to the law's Article 23, companies cannot issue more stablecoins within the bloc if their stablecoin exceeds a daily threshold of one million transactions as a medium of exchange or a total daily trading volume exceeding €200 million (approximately $215 million).
The EU's MiCA framework, an example for other jurisdictions
Despite the challenges, Volka says, MiCA is an example for other jurisdictions to learn from and follow. Coincover Head of Strategy Eleanor Gaywood concurred with this viewpoint and told The Block that implementing MiCA’s provision for stablecoins puts the EU at the forefront of a transition to embrace the innovations from the cryptocurrency sector.
"Over the past few weeks we’ve seen several exchanges de-list certain stablecoins in the run up to implementation deadline, which to me, suggests there is still an element of confusion amongst crypto firms over how to comply with the new rules. Looking ahead, I hope that ESMA works collaboratively with the industry in helping firms comply rather than regulating through enforcement action such as fines or penalties," Gaywood added.
On June 30, MiCA became partially applicable for crypto asset service providers and their KYC/AML requirements. However, full compliance with the bloc's new regulatory framework will be required by December.
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