Tether, Circle and other major stablecoin issuers will soon be on the phone in the European Union.
With the new rules coming into effect on June 30, they will not only need the proper authorization to operate in the 27-nation trading bloc, but will also have to deal with the strict limits on transaction numbers and values that have been laid down in the Markets in Crypto Asset (MiCA) legislation.
According to Robert Kopitsch, secretary general of Blockchain for Europe, the rules mean that some of the largest stablecoin issuers, including Tether, whose dollar-pegged USDT is the largest in the world by market capitalization, and Circle, responsible for the second largest second largest USDC, may not be allowed to operate in the EU.
“Non-EU, euro-denominated stablecoins – if they cross a certain threshold – then you have to stop issuing and using them, and that creates a problem because 99% of the stablecoin market is in USD,” Kopitsch said on the sidelines of CoinDesk’s Consensus 2024 conference in Austin, Texas last month.
MiCA is the EU’s comprehensive set of rules for the crypto industry. It was voted into law last year and allows companies licensed by a member state to operate across the bloc.
According to the law Article 23Companies must stop issuing an asset-referenced stablecoin that is used as a medium of exchange for more than 1 million transactions or a value of more than 200 million euros ($215 million) per day. The stablecoin rules go into effect later this month, with the remaining provisions expected to go into effect in December.
Blockchain for Europe and the Digital Euro Association – a think tank – tried fight against the measures in a 2022 letter arguing that they had effectively banned major stablecoin issuers.
An EBA spokesperson told CoinDesk that the provisions do not prevent companies from issuing stablecoins denominated in assets other than the euro. The key is if they are used as a medium of exchange, to pay for goods or services. In that case, the specific caps apply.
Publishers can serve Europeans without restrictions if the tokens are not a medium of exchange, says Jón Egilsson, co-founder of Monerium said in a statement. That includes transactions between currency areas, peer-to-peer transactions and where a cryptocurrency is exchanged for an e-money token, he said.
Although the EBA has not yet clearly defined how it will measure these values, consultation document suggests that transactions with both parties outside the EU can be excluded, but that any transaction with at least one party in the EU can be counted.
According to the discussion, a transaction includes both on-chain and off-chain transfers. Moves between addresses or accounts of the same person do not qualify as a transaction.
A spokesperson told CoinDesk that a final report on how the EBA will measure transactions is likely to be released later this month.
Companies that have had to suspend their issuance must submit a plan demonstrating that they can meet the limits before they are allowed back in. This can be tricky: USDT’s daily global trading volume is about $27 billion according to CoinGecko data. USDCs do 5 billion dollars.
Another barrier is obtaining the necessary certification.
“If you are a stablecoin issuer at European level, you need a license as an electronic money institution or bank. That is a very expensive and lengthy process,” Kopitsch said.
So Tether, Circle and other issuers have just three days to secure an e-money license to operate legally.
Circle conditionally registered as a Digital Asset Service Provider with the French Financial Markets Authority in April, aims to have an electronic money license by the deadline, a company spokesperson said.
“Circle is committed to full compliance with EU MiCA regulations. We intend to onshore EURC to the EU and issue it from Circle France in a MiCA-compliant manner,” the spokesperson said. “In addition, we intend to issue USDC to our EU-based clients of the same entity in accordance with MiCA and subject to regulatory approval.”
EURC is the company’s euro-backed stablecoin. The equivalent of Tether is EURT. Earlier this week, crypto exchange Bitstamp has removed the Tether tokenreferring to MiCA. OKX has delisted USDT in March, saying it wanted to focus on euro liquidity in the region.
“Tether has worked extensively with its exchange counterparties in Europe regarding requirements, including those related to the continued listing of USDT and other Tether tokens, and the interpretation of key regulatory provisions,” said Paolo Ardoino, CEO of Tether, in a statement. “While Tether is optimistic about the implementation of MiCA, it remains critical that stablecoin regulatory policies are balanced, protect consumers and promote growth in our emerging industry.”
“The question is what happens next, because there is a growing awareness that there is a need for a solution,” Kopitsch said of the restrictive nature of stablecoin rules.