EU to introduce strict stablecoin regulations by end of June

The freedom of stablecoin issuers on European markets ends on June 30, as EU MiCA (Markets in Crypto Assets) regulations will introduce limits on transaction volumes and values. This means that asset-pegged stablecoins that are not pegged to the euro, support more than one million transactions or facilitate the flow of more than $215 million in value will have to be withdrawn from the bloc.

Transactions included in the limits will include transactions carried out as part of payments for goods and services settled online and offline. Issuers such as Tether and Circle will need to re-strategize their operations in the EU as their dollar-pegged stablecoins record huge daily trading volumes reaching into the billions of dollars.

Additionally, most stablecoins on the market are pegged to the dollar. Therefore, issuers must reconsider offering their flagship stablecoins in this market and focus on introducing euro-pegged assets. The regulation, although strict, is implemented to prevent the devaluation of the euro by other currencies.

However, issuing euro-linked stablecoins is harder than it sounds, as issuers in the EU must obtain e-money or banking licenses — a tall order. In addition, they must also demonstrate to regulators that they can limit transaction volumes and values ​​in line with the mandate.

Transactions in this context include payments for goods and services, peer-to-peer transactions, purchases of e-money tokens, and transfers made to transfer value between exchange accounts and wallets held by the same person do not count. Tracking such transfers can pose huge hurdles for issuers and limit their ability to operate within the bloc.

Nevertheless, Tether intends to operate in the EU, fully compliant with MiCA demands, as soon as the regulation comes into effect. It wants to obtain an electronic money license by the end of this month, in a few days, and issue a euro reference stablecoin, EURC. It also intends to issue USDC within the limits set by MiCA.

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