MiCA Reshapes Stablecoin Regulations

MiCA introduces strict regulations for stablecoins like USDC. From June 2023 onwards, with major parts coming into effect by June 30, 2024, MiCA requires e-money tokens to:

European users will no longer be able to earn rewards on the stablecoin USDC after November 30. The final rewards will be distributed in the first 10 business days of December, the exchange announced Monday.

The move comes as part of a broader regulatory shift in the European Union. The Markets in Crypto Assets (MiCA) regulation, set to be fully implemented by June 30, 2024, will introduce strict rules for stablecoins.

Among other things, MiCA will require stablecoin issuers to be licensed credit or electronic money institutions, have reserves fully covering the circulating supply of the stablecoin, and allow token holders to redeem at face value.

The regulation also bans interest on e-money tokens, a category that includes stablecoins pegged to fiat currencies. This is intended to distinguish them from traditional financial instruments while ensuring their stability.

Coinbase said it’s adjusting its offerings “in line with MiCA,” which also includes delisting non-compliant stablecoins in the European Economic Area (EEA).

Other major crypto firms have also announced their compliance measures. Uphold said it will be pausing services in the EEA on December 31, while Bitstamp said it will be fully licensed by the beginning of 2023. Tether, the issuer of the world’s largest stablecoin USDT, said it will be applying for registration under MiCA.

The move is set to affect a large number of European crypto users, as USDC is the second-most traded cryptocurrency in the region after bitcoin. The stablecoin rewards were a key incentive for many users to hold their crypto on Coinbase.

However, the regulatory changes are necessary to ensure the safe and sound development of the crypto market, especially as stablecoins become more central to digital payments.