Binance, one of the biggest cryptocurrency exchanges in the world, has announced it will be de-listing 9 stablecoins for users in the European Economic Area (EEA) later this month.
The announcement comes after finding that they do not comply with MiCA regulations (European Union’s Markets in Crypto Assets), so are no longer able to be traded within the region.
From March 31st, stablecoins such as USDT, FDUSD, TUSD, USDP, DAI, AEUR, UST, USTC, and PAXG will be removed from Binance for users in the EEA. Whilst people will still be able to deposit and withdraw them, Binance has suggested that users convert them to cryptocurrencies that they can more freely trade. (Source: Decrypt).
What Are Stablecoins?
Stablecoins are a type of cryptocurrency that are designed to be less volatile by being pegged to a commodity or currency.
For example, PAX Gold (PAXG), Tether Gold (XAUT), and Kinesis Gold (KAU) are all cryptocurrencies that are pegged to gold. This means that the value of each token is tied to the value of a specific amount of gold.
But how does it work?
Generally, issuers of the stablecoin will hold reserves of the asset, so each token is actually backed by something tangible.
This makes them an appealing alternative to decentralised coins, making them a good middle ground between more volatile cryptocurrencies and traditional finance.
Why Are Stablecoins So Popular?
Stablecoins have gained in popularity mainly because they are a less volatile alternative to traditional cryptocurrencies.
Assets like Bitcoin and Ethereum are still viewed as relatively risky assets, especially as they can rise and fall quickly. As an example of this, Bitcoin has plummeted almost 30% in the last 7 weeks due to lack of investor certainty around Trump’s policies. Stablecoins, though less likely to bring high returns, maintain a level of growth as they are attached to an asset with real-world value.
Stablecoins are also widely used with foreign exchange transactions as they can be moved around for lower fees than traditional banks.
What Are MiCA Regulations?
The Markets in Crypto Assets (MiCA) regulations are a set of rules set out by the EU to regulate the buying and trading of crypto assets.
Launched in 2023, but fully in effect from December 2024, the regulations cover all 27 EU states and additional EEA countries like Iceland, Liechtenstein, and Norway
Under MiCA, only licensed companies are allowed to offer stablecoins to EEA residents. Whilst some companies have rushed to secure licences to allow them to continue trading, those that have not (such as those listed above) will be delisted.
Which Countries Globally Are The Most Crypto Friendly?
As regulations start to gather momentum in different countries around the world, some areas are emerging as more friendly than others.
According to Lincoln Global Partners, some of the most friendly crypto environments include:
- El Salvador – Which accepts Bitcoin as legal tender
- Portugal – No capital gains or income tax on assets
- Switzerland – No capital gains tax on crypto trading
- Singapore – No crypto capital gains tax
- UAE – No capital gains tax, but some business taxes (9%)
- The Cayman Islands – where no capital gains tax is applied
- Estonia – which has a clear, flat 20% tax, making it easy to navigate
What Does This Move Mean For Crypto?
Ultimately, it’s no surprise that governments and trade bodies have started to roll out regulations to protect their residents from risky crypto-coins.
Whilst it definitely does not mark the end for stabecoins in the EU, it does mean that any company that wishes to issue them will have to become MiCA compliant.
In a way, enforcing these regulations can help weed out any companies that plan to exploit users, providing a level of protection to them. This could help improve confidence in them as an asset, allowing them to become a popular and safe investment choice.
