EU's MiCAR Targets Stablecoins: Tether Banned, Circle Adapts
Yesterday, parts of the EU's Markets in Crypto-Assets regulation (MiCAR) came into effect, primarily targeting stablecoins. The new rules set a daily transaction volume cap of 200 million euros for 'e-money tokens' (EMTs) and 'asset-referenced tokens' (ARTs), effectively banning major stablecoins like Tether from the EU. Meanwhile, Circle, the issuer of the second-largest stablecoin USDC, has obtained a license in Paris to comply with MiCAR.
MiCAR aims to 'unleash the full potential of crypto-assets' while providing market strength through appropriate regulation. It requires issuers of ARTs and EMTs to present certain asset reserves and hold them at specific proportions in EU banks. Circle is the first major global stablecoin issuer to receive a MiCAR license, allowing it to operate across the EU. Other notable entities like Bitpanda have also received licenses. However, some issuers, such as Paxos, have chosen to regulate elsewhere due to MiCAR's requirements. Tether, the world's largest stablecoin, has given up on Europe and will not apply for a license under MiCAR.
The German financial regulator, BaFin, will oversee issuers of stablecoins and other asset-based tokens in Germany, as of yesterday. MiCAR has been criticized for being outdated, preventing innovation, and hindering EU citizens from using certain products available elsewhere.
With MiCAR now in effect, the EU's crypto-asset landscape is set to change significantly. While some issuers like Circle have adapted, others like Tether and Paxos have chosen alternative paths. The BaFin will now regulate stablecoin issuers in Germany. Time will tell how MiCAR's impact on innovation and consumer access to crypto-products will unfold.
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