The European Union’s new Markets in Crypto Assets (MiCA) regulations, which came into effect on December 30, are set to strengthen euro-denominated stablecoins, according to a research report by JPMorgan.
JPMorgan Says EU MiCA Regulations Will Boost Euro-Denominated Stablecoins
Analysts led by Nikolaos Panigirtzoglou noted that under MiCA, only compliant stablecoins will be available as trading pairs on regulated markets, which will lead to a shift in the offerings of exchanges within the EU.
MiCA's Impact on Stablecoins
Regulations require stablecoin issuers to hold significant reserves in European banks and obtain trading licenses.
This has caused a divergence between compatible stablecoins like Circle’s EURC and non-compatible ones like Tether’s EURT, which have faced operational challenges.
Tether announced in November that it would phase out its EURT stablecoin, allowing users to use the tokens for up to 12 months. The decision led to Tether’s USDT being delisted from several EU-based exchanges.
Despite these hurdles, Tether continues to dominate the global stablecoin market, especially in Asian markets where regulatory restrictions are less stringent, JPMorgan said.
The report highlights how MiCA presents opportunities for compatible euro-backed stablecoins to gain traction. Circle’s EURC has emerged as a strong contender, benefiting from the regulatory clarity offered by MiCA.
A stablecoin is a type of cryptocurrency that is pegged to a stable asset, such as the US dollar, euro, or even commodities like gold, designed to minimize price volatility. MiCA’s transparency and reserve-backing requirements aim to increase trust in these assets.
Tether is adapting to the new regulatory environment, evidenced by its investments in MiCA-compliant stablecoin issuers.
In December, the company announced its support for European stablecoin issuer StablR and previously signaled its commitment to maintaining a presence in the EU market by partnering with Quantoz Payments.
*This is not investment advice.