Author: Weilin, PANews
The European Union's Markets in Crypto-Assets Regulation (MiCA) has implemented regulatory rules for stablecoin issuers as of June 30, and is set to be fully enforced by December 30 this year. As the EU's first comprehensive regulatory framework for the crypto industry, the rollout of MiCA not only impacts the euro stablecoin market but also provides a reference for global stablecoin regulatory models.
However, Tether, the issuer of USDT, faces urgent challenges in this context. Without obtaining a stablecoin issuance license under the MiCA framework, Tether is actively seeking solutions by investing in emerging projects. On November 18, Tether announced an investment in the Dutch company Quantoz, which will launch two MiCA-compliant stablecoins.
Circle Complies First, 21 Issuers Compete for Market
On November 18, the Dutch blockchain company Quantoz announced the launch of two stablecoins, USDQ and EURQ, compliant with EU regulatory standards under MiCA, pegged to the US dollar and the euro, respectively. These stablecoins will be listed on exchanges Bitfinex and Kraken on November 21. It is reported that Tether, Kraken, and Fabric Ventures have invested an undisclosed amount in Quantoz.
Quantoz's compliance strategy indicates that Tether is attempting to expand its presence in the euro stablecoin market by supporting projects that comply with MiCA regulations. This investment may be seen as a key step for Tether in finding "agents" in the euro stablecoin sector.
As of November 20, according to Coingecko data, the top five participants in the euro stablecoin market by market capitalization are:
- Stasis (EURS): Market Cap $131 million
- Circle (EURC): Market Cap $89.49 million
- SG-Forge (EURCV), a subsidiary of Société Générale: Market Cap $41.91 million
- Tether (EURT): Market Cap $26.99 million
- Angle (EURA): Market Cap $21.18 million
According to Coingecko data, as of November 20, Circle's EURC and SG-Forge's EURCV together account for 40% of the euro stablecoin market, based on a total market cap of $326 million. This market concentration poses challenges for new players but also provides an entry point for Quantoz, which has a compliance advantage.
MiCA imposes strict requirements on stablecoin issuers, including the following key provisions: First, licensing requirements: issuers must obtain an electronic money institution (EMI) license in at least one EU member state or register as a credit institution. Second, reserve asset requirements: at least 60% of reserve assets must be held in European banks. Additionally, there are trading volume limits: if a stablecoin's daily transaction volume exceeds 1 million transactions or daily transaction value exceeds €200 million, the issuer will be prohibited from issuing more stablecoins.
Major issuers like Circle and SG-Forge have met these requirements by registering for EMI licenses in France. For example, SG-Forge's EURCV operates on Ethereum and recently announced plans to launch on Ripple's XRP Ledger (XRPL) to expand its market coverage.
With Tether's investment in Quantoz, Tether may have the opportunity to further stabilize its share in the euro stablecoin market through "agents." The search for new companies holding EMI licenses has also become a newly emerging trend.
On November 19, blockchain and tokenization infrastructure platform Paxos announced that it has agreed to acquire Membrane Finance, a licensed electronic money institution (EMI) based in Finland. This acquisition is subject to regulatory approval. Once completed, Paxos will become a fully licensed EMI in Finland and the EU.
Tether CEO Expresses Concerns Over MiCA, More Companies Seek Competitive "Agents"
For Tether, the new requirements brought by MiCA pose urgent challenges. According to previous reports, Coinbase Global Inc. plans to delist all unauthorized stablecoins from its European crypto exchange by the end of the year, which could impact tokens like Tether's USDT.
Currently, major cryptocurrency exchanges, including Uphold, Bitstamp, Binance, Kraken, and OKX, are taking measures to comply with the EU's new cryptocurrency regulations. OKX has already delisted all trading pairs for USDT in Europe. Other major exchanges, such as Binance and Kraken, have not yet delisted USDT but are considering limiting its functionality.
Tether's CEO Paulo Ardoino previously stated that the upcoming regulatory framework in Europe will bring banking-related issues for stablecoin issuers, which could threaten the broader stability of the crypto market. According to MiCA, stablecoin issuers must hold at least 60% of their reserve assets in European banks. Ardoino noted that since banks can lend out up to 90% of their reserves, this could introduce "systemic risk" for stablecoin issuers.
Some major stablecoin issuers have faced banking-related issues in the past. For instance, in March 2023, Circle's USD Coin (USDC) experienced a decoupling from the US dollar. At that time, Circle was unable to withdraw $3.3 billion in reserves from Silicon Valley Bank, which had previously managed $40 billion in reserves for the stablecoin issuer before the bank ceased operations.
In Ardoino's view, the banking reserve requirements imposed by MiCA mean that an increasingly large portion of stablecoin reserves will be held on bank balance sheets. If a bank goes bankrupt, this could have significant repercussions. Ardoino pointed out, "If you deposit €1 million in a bank account in Europe, the bank's federal deposit insurance is capped at €100,000. If the bank goes bankrupt, you can only recover €100,000, and the rest will go into bankruptcy liquidation because your deposited money has already been counted as part of the bank's balance sheet."
However, Ardoino added that under the new MiCA regulations, stablecoin issuers can protect themselves from potential bankruptcy risks through securities: "The protective measure is to purchase securities like treasury bills or government bonds. If a bank goes bankrupt and you own securities, these securities are nominal assets, so they will be returned to you; you just need to transfer them to another bank."
Crypto Industry Calls for Extension of MiCA Transition Period
Recently, the crypto industry has written to the European Securities and Markets Authority (ESMA), pointing out that ESMA has yet to finalize the rule details, making it difficult for businesses to complete the certification process in a short time, which may force them to suspend services.
Currently, MiCA has an 18-month regulatory transition period, but the duration chosen by each member state varies. For example, France and Greece have an 18-month period, while Lithuania has only 5 months, which could lead to disruptions in cross-border services, affecting users' trading capabilities and causing financial losses.
Additionally, industry organizations have stated that the uneven implementation of MiCA rules threatens the "passport mechanism." The core advantage of MiCA lies in the "passport mechanism," which allows businesses certified in one member state to provide services throughout the EU. However, inconsistencies in rule enforcement may weaken this advantage.
Crypto industry representatives are calling on ESMA to extend the authorization transition period until the end of June 2025 or to require member states to coordinate a unified timeline to alleviate compliance pressure on businesses and avoid service interruptions.
According to previous estimates, the implementation of MiCA is expected to drive significant growth in the euro-backed stablecoin sector. By 2025, the market capitalization of euro stablecoins is expected to reach at least €15 billion, increasing to €70 billion by 2026, and potentially surpassing €2 trillion by 2028.
Overall, with the full implementation of MiCA, traditional financial institutions like Société Générale, blockchain companies like Circle and Stasis, and emerging issuers like Quantoz are actively positioning themselves to compete for this market. In the future, compliance and technological innovation will be key factors in determining market winners and losers. It can be said that for stablecoin issuers, MiCA represents a turning point filled with both risks and opportunities.
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