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Nigeria to introduce cryptocurrency regulations after Europe; The Stablecoin market remains stable in June

Posted on by darion

The Nigerian cryptocurrency community has expressed admiration for the new European Markets in Crypto-Assets Regulation (MiCA), particularly its rules on stablecoins. They see the regulations as beneficial, emphasizing the importance of aligning cryptocurrency projects with local interests in order to protect national currencies.

In a recent conversation, Nigerian data and policy analyst Obinna Uzoije discussed the potential lessons that the Economic Community of West African States (ECOWAS) could draw from Europe’s MiCA. He highlighted the potential benefits that a similar regulatory framework could bring to the cryptocurrency landscape in ECOWAS member states.

Uzoije noted that stablecoins are currently the most widely used cryptocurrencies, especially in Africa, where transactions using them outperform transactions using other forms of digital assets.

The significance of the MiCA stablecoin regulations, which come into force on June 30, is significant. These rules represent a significant milestone in the regulation of crypto assets not only in Europe but potentially in other regions as well. Under these rules, without a transitional period, issuers and relevant parties must obtain a MiCA license to offer or trade asset-based tokens (ART) or electronic money tokens (EMT) to the public in the European Union.

The impact of a unified cryptocurrency regulatory framework

Under the leadership of Nigerian President Bola Tinubu, who currently leads the Economic Community of West African States (ECOWAS), there is a unique opportunity to establish a regulatory framework for cryptocurrency projects in the region. Uzoije points out that this could be particularly transformative for ECOWAS, as some member countries, such as Sierra Leone, have strict or outright bans on cryptocurrencies. A unified regulatory approach could ease these restrictions across the 15 member states.

Uzoije argues that a consistent set of regulations would provide much-needed clarity for would-be cryptocurrency investors, simplifying the investment process in different countries by eliminating the need to navigate different national regulations. Such clarity could make the ECOWAS region more attractive to investors by reducing regulatory uncertainty, a major global barrier to cryptocurrency investment.

In addition, Uzoije points to the ongoing dispute between Nigerian authorities and cryptocurrency exchange Binance, where money laundering has been cited as a major concern. By adopting a unified regulatory framework, ECOWAS could step up its efforts to combat money laundering. This framework would facilitate more effective monitoring of money laundering activities related to cryptocurrencies. In addition, clear regulations would help address terrorism financing, another major concern related to the use of cryptocurrencies in the region.

Key changes in market valuations of major stablecoins

In June, the stablecoin market showed minor supply fluctuations, with several stablecoins experiencing changes in their market valuations. Tether (USDT), which holds the title of largest stablecoin by market capitalization, rose marginally by 0.7%, increasing its market value to $112.65 billion. Meanwhile, First Digital’s fifth-ranked FDUSD has undergone a significant reduction of 28.5% and its market capitalization is now around $2 billion.

The market value of USDC, the second-largest stablecoin, fell slightly by 0.4% to $32.24 billion. Third-ranked DAI Makerdao fell 3.9%, giving it a market valuation of $5.13 billion. Meanwhile, Ethena’s USDE, the fourth largest, saw the most notable growth among its peers, at 21.4%. Tron’s USDD and frax dollar (FRAX) saw slight corrections, up 0.5% and down 0.1%, respectively. TrueUSD (TUSD), the eighth largest, saw deliveries decline 1.3%.

Further down the list, PayPal’s PYUSD, the ninth-largest stablecoin, rose 6.3%. While Blast’s USDB, the tenth-largest, saw a small 0.2% decline. The stablecoin market’s developments in June underscore that supply growth is primarily responding to market demand. These small fluctuations indicate that while stablecoins play a fundamental role in the cryptocurrency ecosystem, their expansion is dependent on specific market demands.

Timetable and implementation of MiCA regulations

From June 30, 2024, significant regulatory changes in the European Union, known as the Markets in Cryptocurrency Regulation (MiCA), will specifically target the emerging stablecoin market, marking a milestone in the regulation of crypto assets not only in Europe but potentially globally. Under this new regime, any entity involved in the public offering or trading of asset-backed tokens (ART) or electronic money tokens (EMT) will be required to obtain a MiCA license, and the regulation will apply immediately, without a transition period.

MiCA marks a significant evolution in regulatory approaches in the EU, moving from a framework focused primarily on anti-money laundering and counter-terrorism financing to a more comprehensive structure. This framework includes prudential and conduct requirements for both crypto asset issuers and crypto asset service providers (CASPs). The regulation aims to streamline the fragmented regulatory landscape, enhance legal certainty, consumer and investor protection and the overall integrity and stability of the European financial system, and promote innovation.

While detailed regulations for stablecoins are due to be introduced by the end of this month, broader regulatory rules for CASPs will come into force six months later, on December 30, 2024. In preparation, the European Banking Authority (EBA) and the European Markets and Markets Authority The European Securities and Exchange Commission (ESMA) has consulted extensively, developing regulatory technical standards (RTS), implementing technical standards (ITS) and guidance. These efforts are intended to help companies understand and meet the regulatory expectations set forth in MiCA.