Author: Weilin, PANews
The regulatory rules for stablecoin issuers under the EU's Regulation on Markets in Crypto-Assets (MiCA) came into effect on June 30 and are scheduled to be fully implemented by December 30 this year. As the EU's first comprehensive regulatory framework for the crypto industry, the implementation of MiCA not only impacts the euro stablecoin market, but also provides a reference for the regulatory model of global stablecoins.
However, Tether, the issuer of USDT, is facing urgent challenges in this context. As Tether has not yet obtained a stablecoin issuance license under the MiCA framework, it is actively seeking ways to cope by investing in emerging projects. On November 18, Tether announced an investment in the Dutch company Quantoz, which will launch two MiCA-compliant stablecoins.
Circle Takes the Lead in Compliance, 21 Issuers Compete for the Market
On November 18, the Dutch blockchain company Quantoz announced the launch of two stablecoins, USDQ and EURQ, pegged to the US dollar and euro respectively, which meet the standards of the EU's MiCA regulation. These stablecoins will be listed on the crypto exchanges Bitfinex and Kraken on November 21. It is reported that Tether, Kraken, and Fabric Ventures have invested an undisclosed amount of funds in Quantoz.
Quantoz's compliance layout indicates that Tether is trying to expand its presence in the euro stablecoin market by supporting projects that comply with the MiCA regulation. This investment can be seen as a key step for Tether to find a "proxy" in the euro stablecoin field.
As of November 20, according to Coingecko data, the top 5 participants in the euro stablecoin market by market capitalization are:
- Stasis (EURS): $131 million
- Circle (EURC): $89.49 million
- SG-Forge, a subsidiary of Société Générale (EURCV): $41.91 million
- Tether (EURT): $26.99 million
- Angle (EURA): $21.18 million
According to Coingecko data, as of November 20, with a total market capitalization of $326 million for euro stablecoins, Circle's EURC and SG-Forge's EURCV together account for 40% of the euro stablecoin market. This market concentration poses a challenge for new players, but also provides an entry point for Quantoz, which has compliance advantages.
MiCA imposes strict requirements on stablecoin issuers, including the following key provisions: First, a licensing requirement - issuers must obtain an Electronic Money Institution (EMI) license or be registered as a credit institution in at least one EU member state. Second, a reserve asset requirement - they must hold at least 60% of their reserve assets in European banks. Additionally, there are transaction volume limits - if a stablecoin's daily transaction volume exceeds 1 million transactions or €200 million, the issuer will be prohibited from issuing more stablecoins.
Major issuers like Circle and SG-Forge have already met these requirements by registering EMI licenses in France. For example, SG-Forge's EURCV, which is based on Ethereum, recently announced plans to launch on Ripple's XRP Ledger (XRPL) to expand its market coverage.
With Tether's investment in Quantoz, Tether may have the opportunity to further stabilize its share in the euro stablecoin market through a "proxy". Finding new companies with EMI licenses has also become a emerging trend.
On November 19, blockchain and token infrastructure platform Paxos announced that it has agreed to acquire Membrane Finance (Membrane), a licensed Electronic Money Institution (EMI) headquartered in Finland. This acquisition is subject to regulatory approval. Upon completion, Paxos will become a fully licensed EMI in Finland and the EU.
Tether CEO Expresses Concerns about MiCA, More Companies Seek Competitive "Proxies"
For Tether, the new requirements brought by MiCA pose an urgent challenge. According to previous public reports, Coinbase Global Inc. will delist all unauthorized stablecoins from its European crypto exchanges by the end of the year, which could impact tokens like Tether's USDT.
Currently, major crypto exchanges, including Uphold, Bitstamp, Binance, Kraken, and OKX, are taking measures to comply with the EU's new crypto regulations. OKX has already delisted all USDT trading pairs in Europe. Other major exchanges, such as Binance and Kraken, have not yet delisted USDT, but are considering restricting its functionality.
Tether's CEO, Paulo Ardoino, previously stated that the upcoming regulatory framework in Europe will bring bank-related issues for stablecoin issuers, which could threaten the broader stability of the crypto market. This is because, according to MiCA regulations, stablecoin issuers need to hold at least 60% of their reserve assets in European banks. Ardoino said that considering banks can lend up to 90% of their reserves, this could introduce "systemic risk" for stablecoin issuers.
Some major stablecoin issuers have faced bank-related issues in the past. For example, in March 2023, Circle's USD Coin (USDC) experienced an event where it became depegged from the US dollar. At the time, Circle was unable to withdraw $3.3 billion in reserve funds from Silicon Valley Bank, which had previously managed $40 billion in reserves for the stablecoin issuer, before the bank ceased operations.
In Ardoino's view, the bank reserve requirements imposed by MiCA mean that an increasingly large portion of stablecoin reserves will be held on bank balance sheets. If a bank goes bankrupt, this could have significant consequences. Ardoino pointed out: "If you deposit 1 million euros in a bank account in Europe, the maximum federal deposit guarantee is 100,000 euros. If the bank goes bankrupt, you can only get back 100,000 euros, and the rest of the funds will go into the bankruptcy process, because the money you deposited has already been recorded on the bank's balance sheet."
However, Ardoino added that under the new MiCA rules, stablecoin issuers can protect themselves from potential bankruptcy risks by investing in securities: "The protective measure is to buy securities like Treasury bills or government bonds. If the bank goes bankrupt and you own the securities, these are nominal assets, so they will be returned to you, and you only need to transfer them to another bank."
The Crypto Industry Calls for an Extension of the MiCA Transition Period
Recently, the crypto industry has written to the European Securities and Markets Authority (ESMA), pointing out that ESMA has been slow to finalize the regulatory details, making it difficult for companies to complete the certification process within a short period of time, potentially forcing them to temporarily suspend their services.
During the implementation process, MiCA currently has an 18-month regulatory transition period, but the duration chosen by each member state varies. For example, France and Greece have 18 months, while Lithuania only has 5 months, which could lead to interruptions in cross-border services, affecting users' trading capabilities and causing financial losses.
Furthermore, crypto industry organizations have stated that the uneven implementation of MiCA rules threatens the "passporting mechanism". The core advantage of MiCA is the "passporting mechanism", which allows companies to provide services across the entire EU after obtaining certification in one member state. However, the inconsistency in rule enforcement may undermine this advantage.
Crypto industry representatives have called on ESMA to extend the authorization transition period to the end of June 2025, or require member states to coordinate a unified timeline, in order to alleviate the compliance pressure on companies and avoid service interruptions.
According to previous estimates, the implementation of MiCA is expected to drive significant growth in the euro-backed stablecoin sector. By 2025, the market capitalization of euro stablecoins is projected to reach at least €15 billion, growing to €70 billion by 2026, and potentially exceeding €2 trillion by 2028.
Overall, with the full implementation of MiCA, traditional financial institutions such as Société Générale, blockchain companies such as Circle and Stasis, and emerging issuers like Quantoz are actively positioning themselves to compete in this market. In the future, compliance and technological innovation will be the key factors determining market success. It can be said that for stablecoin issuers, MiCA is a turning point where risks and opportunities coexist.
