The European Union’s (EU) new Markets in Crypto-Assets Regulation (MiCA) is expected to boost the usage of Euro-indexed stablecoins at a 1:1 ratio. According to a research report published by the investment banking giant JPMorgan, the MiCA regulation, effective from December 30, 2024, mandates that exchanges within the EU conduct transactions solely with compliant stablecoins.
Compliance Takes Center Stage for Stablecoins
The report, led by JPMorgan’s chief analyst Nikolaos Panigirtzoglo, indicates that the regulation may lead to significant changes in the stablecoin market. It highlights how Circle’s Euro-indexed stablecoin, EURC, is gaining strength due to its compliance, while Tether‘s EURT and similar non-compliant products face challenges.
The new rules require companies issuing stablecoins to maintain substantial reserves in European banks and obtain licenses for transactions. This has led Tether to withdraw its EURT stablecoin from the EU market. The company announced in November that it would gradually phase out its Euro-indexed stablecoin, allowing users to redeem their coins over the next 12 months.
Tether Maintains Strength in Asian Markets
Despite challenges in the EU, Tether continues to be a “dominant force” in the global stablecoin market. The report states that the company is maintaining a strong position in Asia due to facing fewer regulations in that region. Additionally, Tether is working to sustain its presence in the EU market by investing in MiCA-compliant stablecoin issuers.
In December, Tether announced its investment in the European stablecoin issuer StablR. Similarly, it has collaborated with Dutch MiCA-compliant stablecoin provider Quantoz Payments to enhance its influence in the EU market.
The report suggests that the EU’s regulation could herald a new era in the cryptocurrency market. It specifically anticipates that MiCA will foster transparency and trust, paving the way for Euro-indexed stablecoins.
