MiCA fermenting! Coinbase delists EU non-compliant stablecoins, what impact does the suspension of USDT have?

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MiCA Effect: Coinbase Begins Compliance with EU Stablecoin Regulations

The cryptocurrency exchange giant Coinbase plans to delist stablecoins that do not comply with EU regulations by December 2024 to adhere to the rules set by the EU's Market in Crypto-Assets (MiCA) framework. MiCA is considered the most diverse and comprehensive regulatory framework in the world for digital assets and their issuers. Coinbase's statement reads, "In line with our commitment to compliance, we plan to restrict the offering of stablecoin services that do not comply with MiCA to users in the European Economic Area (EEA) by December 30, 2024."

MiCA Regulation Requires Stablecoin Issuers to Obtain EMI License

The MiCA rules, which came into effect on June 30, 2024, require stablecoin issuers to obtain an Electronic Money Institution (EMI) license in at least one EU member state to continue operating in the 27 member states. Coinbase, to comply, will only offer regulated stablecoins.

Different Compliance Strategies of Circle and Tether

While some stablecoin issuers have quickly adapted to these regulations, not all have. The world's second-largest stablecoin issuer, Circle, became the first company to obtain an EMI license in the EU in July, allowing it to legally issue its stablecoins, including USDC and EURC, in the EU market.

As Circle becomes the first MiCA-compliant stablecoin provider, will Tether's leading position be challenged?

However, Tether, the world's largest stablecoin issuer, has yet to obtain an EMI license that complies with MiCA. Despite Tether's significant market share, it remains unauthorized under current EU regulations.

Tether's Response: Addressing EU Demands through Technology

Tether expressed support for the EU's efforts to establish a structured regulatory framework through MiCA. However, the stablecoin issuer also acknowledged that some regulations make operations in the EU more complex.

A spokesperson for Tether stated, "Tether appreciates the efforts of EU regulatory authorities to establish a structured framework, which is crucial for the industry's development. However, certain MiCA regulations make the operation of licensed stablecoins in the EU more complex and may introduce new risks to local banking infrastructure and stablecoins themselves."

To address these complexities and support its users in the EU region, Tether revealed that it is working on developing a technological solution to meet the demands of the European market.

As MiCA comes into effect at the end of the month, Tether's CEO expresses concerns about stablecoin operational risks

Coinbase's Coordinated Measures

Coinbase intends to release more information about its strategy in November to provide options for clients in the European Economic Area (EEA) to transition to stablecoins issued by authorized entities, such as Circle's USDC and EURC.

Responses from Exchanges like Binance, OKX, Kraken, and Others

In June, Binance announced restrictions on fiat-to-crypto functions, allowing compliant stablecoin conversions only. In August, Binance announced the listing of the EU-compliant stablecoin Eurite EURI.

OKX reportedly delisted USDT trading pairs in the EEA, while the US compliant exchange Kraken also indicated considering delisting USDT in the EU.

What Could be the Impact of MiCA Stablecoin Regulations?

The author believes that three industry roles - issuers, exchanges, and users - will each have pros and cons.

Issuers: MiCA stablecoin regulations require issuers to register in the EU and obtain licenses. While Tether has been a stablecoin leader, its offshore operations and passive compliance approach put it at a disadvantage in the EU regulatory environment. US-based companies like Circle, which have already established a presence in the EU, or other local EU stablecoin providers, may have opportunities to thrive.

Exchanges: The legal status of exchanges in the EU has always been ambiguous, with operators passively responding to compliance. Recent regulations and enforcement actions in countries like France or the UK have caused many operators to withdraw. Restrictions on USDT may force many exchanges to deal with EU governments and provide more oversight. However, compliant exchanges may gain more market share due to MiCA.

Users: Users worldwide can use various platforms through different channels, with concerns about local operators' operational capabilities only when dealing with fiat currencies. The widespread implementation of MiCA may lead to international operators deciding whether to stay in the market, limiting IP usage and potentially causing inconvenience for EU users to bypass restrictions.

Since stablecoins are the most common crypto asset used for illegal activities like money laundering, fraud, drug trafficking, and terrorist financing, Tether and regulatory authorities worldwide are working to combat misuse of stablecoins and virtual asset service providers.

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