The MiCA law is creating major changes in the European stablecoin market, forcing "big players" like Coinbase and Tether to adjust their strategies.
The MiCA law "forces" Coinbase, Tether to adjust their stablecoin strategy
The European Union's MiCA (Markets in Crypto-Assets) law, after being approved in 06/2023, has had a strong impact on the crypto industry, forcing exchanges and stablecoin issuers to adapt.
The two "giants" Coinbase and Tether are also not outside this vortex. To continue operating in the European market, both are making major changes to their stablecoin development strategies.
Coinbase stops paying interest on USDC in Europe
As Coin68 reported, on 21/11, the cryptocurrency exchange Coinbase announced an increase in the interest rate to 4.7% APY for users holding the USDC stablecoin on Coinbase Wallet.
However, just over a week later, Coinbase announced that starting 01/12, it will temporarily suspend the profit-sharing program for USDC holders in the European Economic Area (EEA), which includes 27 EU countries and countries like Iceland, Norway and Liechtenstein.
MICA is kicking in -> Sunsetting USDC Rewards in the EU Due to MiCA @coinbase @circle pic.twitter.com/8GCGlpt8Xd
— Marina Markezic (@MarinaMarkezic) November 28, 2024
According to the content sent in the email, Coinbase's decision was made to comply with the stablecoin regulations in the MiCA law - which includes banning crypto companies and stablecoin issuers from providing yields on stable assets like USDC, in order to protect investors and maintain the stability of the financial system in the region.
Coinbase's decision to suspend the USDC reward program has faced a strong wave of opposition from the European crypto community against the MiCA law. Many users expressed disappointment, saying that MiCA is "strangling" crypto companies with rigid and unreasonable regulations.
Paul Berg, co-founder and CEO of Sablier, shared a sarcastic comment on the X platform: "I'm very grateful to the EU for protecting me from earning a return on the USDC I hold on Coinbase."
Not only Paul Berg, but Ripple Labs' CTO David Schwartz also criticized the MiCA law and defended Coinbase: "It's funny how often regulations prevent companies from doing things that are unarguably pro-consumer".
It's funny how often regulations prevent companies from doing things that are unarguably pro-consumer.
— David "JoelKatz" Schwartz (@JoelKatz) November 29, 2024
The wave of opposition to MiCA in the face of Coinbase's decision is raising many questions and debates around the law. Is MiCA "strangling" the development of the crypto market instead of protecting users as its initial goal?
Tether stops supporting the EURT stablecoin due to MiCA regulations
Not only Coinbase, the stablecoin "giant" Tether also has to "bow down" to the pressure of MiCA.
According to the announcement posted on 27/11, Tether will officially stop supporting EURT - the Euro-pegged stablecoin.
Tether Updates Users on a Strategic Transition to Better Support Community-Driven Product Support
— Tether (@Tether_to) November 27, 2024
Learn more: https://t.co/YEAhg4SPsv
EURT users on the Ethereum, Solana and TRON blockchains will have until 27/11/2025 to convert to other tokens. Tether also stopped accepting new EURT issuance requests. Tether said:
"This is a necessary step to align with our development strategy in the context of the changing stablecoin legal framework in Europe. We will continue to focus on other priority products, while awaiting a more open and innovative legal framework that provides the best stability and protection for users."
Specifically, Tether will shift to supporting MiCA-compliant stablecoins such as EURQ and USDQ from Quantoz Payments, developed on Tether's RWA Hadron platform.
Tether's decision to retire EURT is due to the strict capital reserve requirements set by the MiCA law, forcing stablecoin issuers to prove their stability before market volatility. Faced with this challenge, Tether had to "weigh and measure" and "let go" of EURT to focus on other products.
In addition, MiCA-compliant stablecoins such as Circle's EURC and Stasis' EURS also contributed to "pushing" EURT out of the game. Once a stablecoin with a market capitalization of over $200 million, EURT now has a mere $27 million.
EURT stablecoin market capitalization statistics. Source: Coingecko (November 29, 2024)
However, the fall of EURT does not significantly affect the "elder brother" USDT. This stablecoin is still dominating the market with a massive $133 billion market capitalization. Nevertheless, Tether still needs to make efforts to obtain the MiCA license for USDT, in the context that some exchanges like OKX have stopped supporting USDT in Europe.
The Future of Stablecoins in Europe
The MiCA regulations have changed the way stablecoin issuers operate in Europe, creating a more stringent legal environment but also opening up opportunities for crypto products that comply with the regulations. These changes have forced companies like Coinbase and Tether to adjust their strategies to protect user interests and comply with regulations.
Meanwhile, companies like Schuman Financial are trying to capitalize on this opportunity by issuing new stablecoins like EURØP, expected to be launched within the next two weeks, or the "giant" Binance has also listed the Eurite (EURI) stablecoin, the first stablecoin compliant with the EU's MiCA law, pegged to the Euro. Coin68 summaryJoin the discussion on the hottest DeFi market issues in the Fomo Sapiens chat group with the Coin68 admins!!!
