European Stablecoin Delisted on Cryptocurrency Exchanges

The largest stablecoin issuers are not European countries, but if they don’t want to lose out on the continent, they must comply as soon as possible.

When the world’s fourth largest cryptocurrency exchange takes the lead across the continent When stablecoins were delisted, they raised eyebrows.  

But this may just be a harbinger of things to come.

More disruption is expected as Europe’s groundbreaking Markets in Crypto-Assets (MiCA) regulatory regime comes into effect at the end of June.

Offshore stablecoins in particular may face challenges. But in the long term, MiCA should provide a more secure and robust ecosystem for stablecoin issuers and users, sources recently said.

Seychelles-based cryptocurrency exchange OKX has reportedly delisted the Tether (USDT) trading pair for European Economic Area (EEA) users ahead of MiCA. "Going forward, spot trading will only support EUR and USDC trading pairs," OKX said in a customer support message.

A Changing Landscape

Market observers were not shocked by the news . Christian Catalini, founder of MIT’s Cryptoeconomics Lab, said he was “not surprised at all by the delistings,” adding, “With the passage of new regulations, the stablecoin landscape There will be significant changes happening globally, and we will see entry by new players – many of which did not start out in cryptocurrencies, but from traditional banks and fintech companies.”

For According to OKX news, Arvin Abraham, a partner at the British law firm Goodwin Procter, predicts there will be more similar situations. He told:

"Post-MiCA [i.e. after June 30], if stablecoins are no longer compliant, we expect exchanges to remove them from Removed from exchanges for European customers."

Abraham said that since the world's largest stablecoins are not European, at least in the European Economic Area, one can see "the pattern will change after MiCA takes effect major changes”. If current leaders are unwilling or unable to comply, they may have to quit.

“MiCA has strict requirements for both e-money tokens and asset reference tokens” (i.e. the two forms of stablecoins in the new MiCA lexicon) will undoubtedly affect stablecoin products in the EU. "We are closely monitoring developments in this area," France-based Bitstamp cryptocurrency exchange said. ”

The challenge for stablecoin issuers is that they now need to be part of the European economy zone entity and is authorized by the European Economic Area Electronic Money Agency Corporation. Graftieaux added: “This is a problem for existing stablecoin issuance, and the timetable is now very short, June 30, 2024 is to meet the new Last date for regulatory requirements. ”

Is this a more difficult task for offshore stablecoin issuers?

For non-European [stablecoin] issuers, Abraham noted: , requiring the issuer to establish and obtain an authorized entity in an EU member state is the most significant unique cost. "But it's not just offshore issuers who face challenges.

"For all issuers, a significant additional burden comes from the requirement to maintain a 1:1 reserve against claims; Some offer permanent redemption rights; for stablecoins worth more than 100 million euros, quarterly reports are required to their EU home country regulators. "Abraham added.

Monerium is a company that issues legal currency stablecoins on the compliance chain in Europe. Its co-founder and chairman and former chairman of the supervisory board of the Central Bank of Iceland, Jon Helgi Elisson, said that currently in Europe Most of the stablecoins on offer are not compliant with existing e-money rules – not to mention those due to be implemented on June 30 due to MiCA.

“The e-money directive is already in place in Europe Effective for over 20 years," Ellison said. "Why is there a group of compliant companies and a group of non-compliant companies in the stablecoin market? This is not a fair thing. ”

Nonetheless, he said that for some stablecoin issuers, compliance with regulations can be “costly.” With MiCA, fiat-backed stablecoin issuers must not only maintain 1:1 liquidity Reserve ratios, and users’ funds must also be segregated, “meaning the customer has a claim on the underlying funds” rather than the company, Ellison said.

For issuers with larger market capitalization, compliance requirements will be higher. “Under current [pre-MiCA] regulation and law, there was no difference based on the size of the issuer,” Ellison said.

The same rules apply to smaller and larger issuers. However, MiCA distinguishes between “significant” issuers and “non-significant” issuers. “If you are a ‘significant’ issuer, you have to set aside more of your own equity to cover potential losses,” explains Ellison.

Will there be more changes for offshore issuers?

“The impact of regulation may create some challenges for operators in international markets,” Graftio said. "For example, this could lead to increased compliance costs, barriers to market entry and potential conflicts with regulatory frameworks in other jurisdictions, leading to policy fragmentation."

Abraham expects "this to have a significant impact on the market "The short-term disruptive impact of Tether is the most popular stablecoin in the world today."

However, in the longer term, "other stablecoins will fill the gap and the ecosystem will arguably be more secure." , as these tokens will comply with MiCA’s strict consumer protection and prudential safeguards.”

Cryptocurrency exchanges may also have to adapt. Abraham said: “Some exchanges require stablecoins as an intermediary form of transaction before they can use fiat currency to purchase cryptocurrencies or enable transactions between two cryptoassets.” These stablecoins may not be available to them anytime soon, at least for Europe This is true for customers.

Setting an example for the cryptocurrency market

Nonetheless, Graftio emphasized the long-term interests of investors and the market. "These regulatory standards, with their focus on market integrity and investor protection, set an example for other markets and, if followed, will only enhance investor confidence."

Graftieaux added that the MiCA framework has already emerged in the UK Given the impact, the UK government’s commitment to digital assets is widely seen as “a clear strategic move to lead the international regulatory phase with the EU.”

Graftieaux also questioned those who claim MiCA could hinder cryptocurrency and blockchain innovation in EU countries. “While innovation plays a vital role in the industry, the importance of market stability cannot be overstated.”

Ultimately, the new framework “recognizes the revolutionary capabilities of blockchain technology , while finding a balance in providing legal clarity and certainty," he continued. Furthermore, "this coordination encourages cross-border innovation through seamless cooperation between EU countries." Graftio said:

"This kind of thinking Cross-pollination will continue to fuel technological innovation – just under a stronger set of regulations.”

Indeed, some on the continent believe MiCA presents an opportunity for a new generation of stablecoin providers.

“We cannot predict the market reaction, but one thing is for sure: MiCA is a real opportunity for European and Euro stablecoins,” Jean-Marc Stenger, CEO of Société Générale – Forge Added:

"The European market is dynamic and has a large, mature and sophisticated investor base. In the long term, all conditions are in place to achieve a rebalancing of Euro and USD stablecoins."

All in all, with its focus on market integrity and investor protection, the EU’s new cryptocurrency regulations could serve as a model for other markets – after some short-term pain, of course. The stablecoin space may also see some new entrants challenge the dominance of U.S. dollar-backed stablecoins.

“While MiCA is far from perfect, it provides a starting point for stronger stablecoin regulation. It is also much better than the current situation in the United States, which does not have any clear regulations and new regulations are needed rules to provide safe and secure stablecoins for consumers and businesses,” Catalini said, adding:

“Once that’s figured out, we’ll finally know which stablecoins are here to stay and which ones can truly Solving real consumer and business needs at scale."