The regulation “Markets in Crypto Assets” (MiCA) officially came into effect on July 1, 2024, and introduced new legislative standards in the European Union for euro-backed stablecoins and foreign ones like USD coin.
The new law is viewed favorably by institutional investors as it aims to clean up the crypto sector from illicit or non-transparent activities.
Thanks to its advent, stablecoin in Europe now have the opportunity to be reborn and can support a significant increase in their demand.
Let’s see everything in detail below.
The MiCA comes into force and regulates the crypto sector in Europe
The MiCa, first EU regulation that governs the cryptocurrency sector, has introduced precise rules for euro stablecoins and for foreign ones like USD Coin.
It officially came into force in the European territory on July 1, 2024, and gradually from here on it will see an implementation of the proposed guidelines.
The objective of the new law is to eliminate illicit activities such as money laundering and create a more sustainable and transparent environment, especially on the stablecoin front.
It is no coincidence that an entire section of the MiCa is dedicated to providing guidance to virtual currency providers regarding the obligations they must comply with.
Among these, the most significant concerns the registration with the European Banking Authority (EBA) and the obtaining of a particular “electronic money license.”
Furthermore, stablecoin providers in Europe must necessarily rely on a credit institution of the Union and deposit collateral assets within it.
The intent of these obligations is to promote the development of local stablecoins anchored to the value of the euro rather than foreign ones such as USDT.
Other foreign cryptocurrencies such as USD Coin have instead obtained approval from the MiCa requirements and can be traded freely on the continent.
It is also worth noting that from July 1st, each stablecoin will be subject to a maximum daily trading limit of 200 million dollars, calculated on a quarterly average.
This threshold implies greater support for those coins still in development rather than for those that already enjoy a significant market share.
Thanks to MiCA, various European institutions are now aiming to release their own euro stablecoin and/or support others in circulation.
Despite there being fewer freedoms and more regulatory obligations, we can affirm that the regulation is viewed positively by Europe because it lays the foundations for a technological development of the entire industry.
Strong demand for euro stablecoins in Europe
As mentioned, the introduction of MiCa on European soil has revitalized euro stablecoins in addition to promoting the presence of USC Coin as the dominant foreign cryptocurrency.
Many financial companies and credit institutions are considering launching their own stable digital currency, given the growing demand from investors.
In this regard, on August 5 the fintech company Next Generation and the electronic money institution DECTA Ltd announced plans to reintroduce the stablecoin EURT.
This resource, already previously in circulation, will also be introduced into the blockchain of Stellar, with an initiative compliant with MiCA regulations.
In particular, DECTA is already authorized by the Central Bank of Ireland as an EMI, which it will use to obtain the issuance license for EURT, ensuring full regulatory compliance.
The two European financial entities have revealed that they intend to launch EURT in October 2024, emphasizing their optimism for a rapidly growing market. These were their words at the press conference:
“Our solid regulatory compliance and our technological infrastructure strongly position us in this evolving market”.
According to Suren Hayriyan, president of Next Generation, at the moment there is a hidden demand for MiCA-backed stablecoins of about 30 billion dollars.
The supply is still much lower, with the capitalization of all euro-pegged coins standing around 573 million dollars.
The partnership between the two companies aims precisely to fill this gap and the projections indicate a significant growth trajectory for EURT.
At the moment, this is the largest stablecoin in the Union with a market share of 400 million dollars. However, this share has remained unchanged for over 2 years, while other competitors are starting to emerge.
We will see if with Mica EURT will have more opportunities to grow both in terms of popularity and financial terms, thanks to the landing on the Stellar network.
The MiCA advantages the stablecoin USD Coin compared to other competitors
The MiCa, in addition to regulating the sector of euro-linked stablecoins by supporting the growth of the niche, puts USD Coin in a good light as the most compliant foreign currency.
Circle is in fact the first global issuer to comply with MiCA directives and to choose France as its European headquarters. The company’s management self-describes its choice to open up to the European Union and commit to respecting the new regulation on digital assets as “forward-looking”.
At this moment USD Coin capitalizes a share equal to 36.1 billion dollars, distributed on multiple blockchains.
The stablecoin appears to be growing significantly since the beginning of the year when its value amounted to 26.2 billion dollars.
It is worth noting that in the first month of MiCa’s application, the stablecoin sector increased overall by 2.1%, encompassing 164 billion dollars.
These are the highest levels since April 2022, with USDC seeing its trading volume grow by approximately 48%.
Despite USD Coin seems crushed by the competitor USDT which capitalizes almost 4 times its value, we can expect that this gap will gradually be filled.
It is estimated that the stablecoin market in Europe will grow to 2,000 billion dollars by 2028, and USDC could assume a dominant position in that context.
That said, priority will be given to local currencies still tied to the euro, we see on the horizon a great opportunity for the crypto guaranteed by Circle.
