EU’s restrictive Stablecoin rules take effect on June 30, issuers are running out of time

Tether, Circle and other major stablecoin issuers will soon be on a tight leash in the European Union.

With new rules coming into effect on June 30, they will not only need appropriate authorization to operate in the 27-nation trading bloc, they will also face the tough limits on transaction numbers and values ​​that exist in the Crypto Asset Markets (MiCA) are detailed. law.

The regulations mean some of the biggest stablecoin issuers, including Tether, whose dollar-pegged USDT is the world’s largest by market capitalization, and Circle, responsible for the second-ranked USDC, may not be able to operate in the EU, Robert Kopitsch said. the Secretary General of Blockchain for Europe.

“Non-EU, euro-denominated stablecoins – if they are over a certain threshold – then you have to stop issuing and using them, and this creates a problem because 99% of the stablecoins 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 package of rules for the crypto industry. It was voted into law last year and allows firms licensed by one member nation to operate throughout the bloc.

According to the law’s Article 23, companies must stop issuing an asset-referenced stablecoin used as a medium of exchange for more than 1 million transactions or a value north of 200 million euros ($215 million) per day. The stablecoin rules take effect at the end of the month, and the other provisions are expected to take effect in December.

Blockchain for Europe and the Digital Euro Association – a think tank – sought to fight the measures in a 2022 letter arguing that they effectively banned major stablecoin issuers.

A spokesperson for the EBA told CoinDesk that the provisions do not prevent companies from issuing stablecoins denominated in assets other than the euro. The key is whether it is used as a medium of exchange to pay for goods or services. If so, then the specific caps apply.

Issuers can serve Europeans without restrictions when the tokens are not a medium of exchange, Monerium co-founder Jón Egilsson said in a statement. This 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 does not yet clearly define how it will measure these values, a consultation document suggests that transactions with both parties outside the EU can be excluded, but any transaction with at least one party in the EU can be counted.

According to the consultation, a transaction includes both on-chain and off-chain transfers. Movements between addresses or accounts of the same person do not qualify as a transaction.

A final report on how the EBA will measure transactions is likely by the end of the month, a spokesperson told CoinDesk.

Companies that have had to suspend issuance will have to submit a plan showing they can stick to the limits before they are reinstated. This can be difficult: USDT’s daily global trading volume is around $27 billion according to CoinGecko data. USDCs are $5 billion.

Another obstacle is obtaining the necessary certification.

“When you’re a European-level stablecoin issuer, you need to have an e-money institution license or banking license, which is a very expensive, long process,” Kopitsch said.

So Tether, Circle and other issuers only have three days to get an e-money license to operate legally.

Circle, which conditionally registered as a digital asset service provider with the French financial markets authority in April, aims to have an e-money license by the deadline, a company spokesman said.

“Circle is committed to full compliance with the EU’s MiCA regulations. We plan to land 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 for our EU-based clients from the same entity in accordance with MiCA and subject to regulatory approval.”

EURC is the company’s euro-backed stablecoin. Tether’s equivalent is EURT. Earlier this week, crypto exchange Bitstamp delisted the Tether token, citing MiCA. OKX delisted USDT in March, saying it wanted to focus on euro-denominated liquidity in the region.

“Tether has engaged extensively with its exchange counterparties in Europe regarding the requirements, including those related to the ongoing listing of USDT and other Tether tokens, and the interpretation of key regulatory provisions,” said Paolo Ardoino, Tether’s CEO. said in a statement. “While Tether is optimistic about MiCA’s implementation, it remains crucial that stablecoin regulatory policies put in place are balanced, protect consumers and nurture growth in our emerging industry.”

“The question is what happens next because there is a growing understanding that there is a need for a solution,” Kopitsch said of the stablecoin rules’ restrictive nature.