MiCA Regulation on Stablecoins Comes into Effect

The EU’s primary legislation on cryptocurrencies, known as MiCA, came into effect for stablecoin regulation on June 30, 2024. Broader MiCA rules will apply starting December 30, 2024, encompassing the regulation of other tokens such as Bitcoin and Ether, along with the regulatory framework for crypto-asset service providers (CASP).

Currently, the focus is on Sections III and IV of MiCA, which govern asset-referenced tokens (ART) and e-money tokens (EMT). As of June 30, crypto exchanges in the EU are only permitted to operate with “authorized” stablecoins.

Stablecoins are a type of crypto asset that maintains a stable value by pegging their market value to another asset. MiCA classifies stablecoins into two main types: e-money tokens (EMT) and asset-referenced tokens (ART):

• ART: Defined in Section III, these are crypto assets that are not e-money tokens and maintain a stable value by referencing another value or a combination of values, including one or more currencies.
• EMT: Defined in Section IV, these are crypto assets designed to maintain a stable value by pegging to the value of a single currency.

MiCA regulations require certain activities related to stablecoins to be conducted only by electronic money institutions (EMI) and credit institutions (banks). Only companies meeting these requirements are authorized to issue, offer, and request trading platforms to list their stablecoins.

Licensed exchanges in the EU have already adapted to this requirement. For instance, Binance now allows users only to sell “unauthorized” stablecoins.

Stablecoin issuers are also taking steps to comply with the new regulations. Circle became the first global stablecoin issuer to meet the MiCA regulatory framework. This was achieved after Circle obtained an EMI license from the French regulator, enabling the company to issue USDC and EURC stablecoins in the EU market.

While the full impact of MiCA on stablecoins remains to be seen, Circle’s example indicates that major companies are prepared to meet MiCA requirements and continue their operations.