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The long road to MiCA is now finally over, and Circle has pulled ahead of rival stablecoin issuers in announcing its compliance with the regulation one day after it came into effect.
Circle has become the first global stablecoin issuer to comply with the EU’s Markets in Crypto-Assets (MiCA) regulation, after its new rules for stablecoins came into effect on June 30.
MiCA was enacted on May 31, 2023, so stablecoin issuers and regulators have had just over a year to prepare for its new requirements on licensing, disclosures, redemptions and reserve assets. The rules for other crypto-assets will come into effect on December 30, 2024.
Under MiCA, the only stablecoins that should be offered to the public are those issued by credit institutions or holders of an electronic money institution (EMI) licence issued within the EU.
Up until Monday (July 1), none of the major stablecoins that dominate the EU’s crypto markets met those criteria.
However, that all changed when Circle announced that regulators in France have approved the company’s EMI licence application, which was originally submitted in March 2023.
Jeremy Allaire, CEO of Circle, wrote a 2,000-word post on X to break the news. “Today’s announcement from Circle is a major milestone in the ongoing development of the internet financial system,” he said.
“With one of the largest economies in the world having established clear regulations that make stablecoins legal electronic money, we are ushering in a phase in the crypto market’s development as a mainstream infrastructure for payments, finance and commerce.”
Circle is now authorised by France’s Prudential Supervision and Resolution Authority (ACPR) as an e-money issuer and an e-money token issuer for both its USDC and EURC stablecoins.
With immediate effect, European customers can now directly access USDC and EURC via the company’s Circle Mint feature in France, which will serve as Circle’s base in Europe.
Allaire said the company has worked “intensively” with French, EU and US regulators to ensure that its stablecoins can be issued in both the US and Europe while maintaining stability and fungibility.
“European users are afforded the protections of MiCA, ensuring safe and sound reserves, fully audited financial statements, prudential risk management and strict compliance with financial crimes and anti-money laundering rules,” he said.
As the first major, global stablecoin issuer to comply with MiCA, Allaire said he expects Circle’s USDC to become the leading US dollar stablecoin in the region.
He also said that EURC has the potential to see rapid adoption under MiCA, in what could be a major boost for the use of euro-denominated digital currency.
“We are already seeing significant and accelerating interest in EURC from major enterprises, large financial institutions, payments firms and others who see the opportunity to leverage blockchain to power new forms of programmable finance and commerce,” he said.
Looking ahead, Allaire said the arrival of MiCA portends a “broader global market structure shift” that will accelerate over the next year, as regulators in the US, UK, Japan, Brazil, Hong Kong and other jurisdictions move towards similar stablecoin regulations.
All eyes on Tether
The announcement of Circle’s compliance with MiCA will bring renewed attention on Tether, the world’s largest stablecoin issuer, whose USDT is currently the most widely-used stablecoin in the EU.
As noted by Allaire, there has been a “scramble” to comply with MiCA across the digital asset industry over the past year, but not all stablecoin issuers have taken part in this scramble.
In Tether’s case, the company has said it cannot comply with MiCA in its current form and will be forced to leave Europe if amendments are not made.
In April, as covered by Vixio, Tether CEO Paolo Ardoino criticised MiCA as an overly burdensome regulation, and one that larger stablecoin issuers will struggle to comply with.
“At Tether, what particularly bothers us about MiCA are the very strong constraints on how you can manage your reserves,” he said.
“If you are a small stablecoin issuer, 30 percent of your reserves must consist of cash deposits at a bank. In the case of stablecoins of systemic size like ours, this requirement rises to 60 percent.”
These requirements are “particularly difficult” for stablecoin issuers that need to be fast and flexible when redeeming tokens, Ardoino added.
Citing the case of Circle’s trapped deposits at Silicon Valley Bank (SVB), the Tether CEO also said that MiCA will expose stablecoin issuers to the risk of bank runs.
In March 2023, it emerged that Circle had deposited $3.3bn of reserves at SVB, which filed for bankruptcy later that month.
“The only way to protect yourself is to buy financial securities such as US Treasury bonds,” said Ardoino. “In this case, even if the bank goes bankrupt, you are guaranteed to get your assets back.”
Exchanges divided on continued listing of non-compliant stablecoins
The lack of MiCA-compliant stablecoins means that Europe’s crypto-asset service providers (CASPs) have had to make tough decisions on whether to continue offering non-compliant incumbents.
Among the major exchanges, Uphold has confirmed that it delisted USDT and five other non-MiCA-complaint stablecoins on June 27.
At Binance, the world’s largest crypto exchange by volume, new restrictions on “unauthorised” stablecoins, including Tether, have been introduced for users in the European Economic Area (EAA).
However, these restrictions only apply to peripheral features of the exchange, such as rewards, loans, margin trading, auto invest, peer-to-peer (P2P) trading and non-fungible tokens (NFTs).
Unauthorised stablecoins for spot trading will remain available “until further notice”, Binance said, to “minimise market disruption”.
Kraken is another exchange that has taken a wait-and-see approach to Tether’s legality under MiCA.
In May, in response to a Bloomberg report indicating that Kraken will delist Tether in the EU, Mark Greenberg, Kraken’s global head of asset growth and management, dismissed the article on X.
“Let's be clear: Kraken continues to list USDT in Europe and we have no plans to delist at this time,” he said.
“We know our European clients value access to USDT and we continue to look at all options to offer USDT under the upcoming regime.”
