JPMorgan Predicts MiCA Regulations Propelling Development of Euro-Linked Stablecoins
In the rapidly evolving world of cryptocurrencies, the Markets in Crypto Assets (MiCA) regulation is reshaping the landscape of stablecoins in the European Union. This regulatory framework, which came into force on December 30, 2024, is benefiting MiCA-compliant stablecoins, as they gain traction and market share amid the struggles of their non-compliant competitors.
According to data from Kaiko, MiCA-compliant stablecoins made up a record 91% of the market by November 2024. This dominance is due, in part, to the single EU-wide license that MiCA provides, enabling pan-EU operations for compliant tokens. Examples of such stablecoins include Circle’s EURC, Societe Generale’s EURCV, and Banking Circle’s EURI.
MiCA defines two main categories of stablecoins—e-money tokens (EMTs), such as EURC, pegged to a single currency, and asset-referenced tokens (ARTs), pegged to a basket of assets. The regulation bans algorithmic stablecoins due to their inherent risks. This focus on fully collateralized stablecoins is causing algorithmic and non-compliant stablecoins to lose market share.
One such non-compliant stablecoin is Tether (USDT), which has not complied with MiCA. As a result, it has been delisted from EU exchanges and is facing significant market presence loss. EU residents can still hold USDT, but they cannot trade it on exchanges, effectively limiting its competitive position within the EU market.
The regulatory environment is not only accelerating the adoption of MiCA-compliant euro stablecoins but also attracting new entrants. Deutsche Bank-backed EURAU is a recent example of a fully MiCA-compliant stablecoin. It leverages strong regulatory supervision from BaFin (Germany’s Federal Financial Supervisory Authority) and integration with regulated marketplaces like Bullish Europe.
JPMorgan, in a new report, cites that MiCA regulations have set the stage for euro-denominated stablecoins. Analysts from the firm suggest that MiCA-compliant stablecoins are strengthening their market positions. However, they have yet to comment on the discontinuation of EURT by Tether.
In summary, MiCA is fostering a robust and compliant euro stablecoin ecosystem with clear benefits for compliant issuers. Meanwhile, non-compliant competitors like Tether are facing challenges within the EU market. The growth of MiCA-compliant stablecoins is a testament to the potential of regulatory clarity in the cryptocurrency sector.
References:
[1] CoinDesk [2] Bloomberg [3] Financial Times [4] Reuters
- In the realm of finance, the growth of MiCA-compliant euro stablecoins, such as EURC, EURCV, and EURI, is being driven by the benefits offered by the MiCA regulatory framework, including a single EU-wide license, which in turn attracts new investors and strengthens market positions.
- As the regulatory landscape continues to evolve in the cryptocurrency sector, with MiCA shaping the landscape of stablecoins in the European Union, non-compliant stablecoins like Tether (USDT) are facing obstacles and losing market presence due to delistings and regulatory restrictions, which could potentially shift investing preferences towards MiCA-compliant stablecoins.
