The European Union’s comprehensive Markets in Crypto-Assets Regulation (MiCA) framework is progressively being implemented, reshaping the landscape for digital assets across the region. The first phase of this regulatory framework, which came into effect on July 1, specifically targets stablecoins and their issuers, setting a precedent for robust financial governance in the crypto sector.
Initial Impact of MiCA on Stablecoins
The introduction of MiCA has significantly impacted the stablecoin market, particularly those pegged to the euro. By establishing clear regulatory standards, the framework has not only purged the market of entities unable to meet these stringent requirements but also cultivated a conducive environment for compliant players.
A New Partnership in the Euro Stablecoin Space
Highlighting the positive changes brought by MiCA, a notable development is the collaboration between France-based fintech company Next Generation and Ireland-based electronic money institution (EMI) Decta. Together, they have announced plans to reintroduce a euro-pegged stablecoin, EURT, on the Stellar blockchain. This venture, which commenced on August 5, aligns fully with the MiCA guidelines.
Next Generation, closely affiliated with the established fintech entity Tempo France, originally launched EURT in 2017. The lack of regulatory guidance at the time led to the suspension of the project. However, under the new MiCA regulations, stablecoins like EURT are categorized as electronic money tokens (EMTs), requiring issuers to hold an EMI license or be recognized as a credit institution, thereby enhancing the security and reliability of these financial instruments.
Regulatory Clarity Boosting Market Confidence
The clarity provided by MiCA has revitalized the euro-backed stablecoin market, making it more predictable and appealing to investors. An industry analyst recently expressed to Cointelegraph the anticipation of a shift towards euro-backed stablecoins as demand in European markets escalates.
Key Features of MiCA Impact:
- Regulatory Certainty: Provides a clear legal framework for stablecoin issuance.
- Market Cleaning: Eliminates non-compliant entities, ensuring a safer investment landscape.
- Investor Confidence: Increases due to enhanced protections and standards.
The Rise of Euro Stablecoins
Decta, already licensed by the Central Bank of Ireland as an EMI, will leverage this certification to issue EURT, guaranteeing full compliance with MiCA. Suren Hayriyan, president of Next Generation, noted the current demand for euro-backed stablecoins is about $30 billion, while the supply remains under $300 million. This partnership aims to bridge this significant gap, with projections pointing to a strong growth trajectory for EURT.
Currently, major players in the euro-backed stablecoin market include Circle with its EURC stablecoin and Tether’s EURT. However, Hayriyan emphasized that Next Generation’s rigorous adherence to regulatory standards and advanced technological infrastructure position it advantageously against these competitors. The targeted launch for their EURT is by October.
Circle notably became the first global stablecoin issuer to comply with MiCA, choosing France as its European base, a move inspired by the country’s progressive stance on digital asset regulation.
The implementation of MiCA is expected to catalyze significant growth in the euro-backed stablecoin sector. Market forecasts estimate a minimum market capitalization of 15 billion euros by 2025, escalating to 70 billion euros by 2026, and potentially exceeding 2 trillion euros by 2028.
As of the end of July, the overall market capitalization for stablecoins had increased by 2.1% to $164 billion, marking the highest levels since April 2022. The trading volume for stablecoins like USD Coin also surged by 48%.
MiCA’s influence on the European digital asset market is profound, establishing a secure and regulated environment that promotes the growth of stablecoins. As regulations continue to unfold, the stability and expansion of the euro stablecoin market are likely to attract more investors, fostering a robust digital economy in Europe.
