European Union’s MiCA Regulation Boosts Euro-Pegged Stablecoins

The European Union’s landmark Markets in Crypto-Assets (MiCA) regulation, effective from Dec. 30, 2024, is expected to increase the market share of euro-pegged stablecoins, according to JPMorgan analysts.

Currently, euro-pegged stablecoins represent only 0.12% of the stablecoin market. MiCA aims to improve this proportion by encouraging European banks and financial institutions to adopt euro stablecoins for customer requirements and blockchain-based financial transactions. This sentiment was expressed in a report by JPMorgan analysts, led by Nikolaos Panigirtzoglou, on Wednesday.

Notable examples mentioned include Societe Generale’s EURCV stablecoin and BBVA’s upcoming stablecoin launch in collaboration with Visa.

Under MiCA regulations, only compliant stablecoins may be used in regulated markets. This situation forces issuers like Tether to either adapt or exit the market. Notably, Tether has ceased its EURT stablecoin and experienced delisting of its USDT from exchanges in the EU. Despite these challenges, Tether continues to dominate the global market, primarily driven by demand in regions with fewer regulatory restrictions, such as Asia. Analysts also noted Tether’s strategic investments in MiCA-compliant firms like Quantoz Payments, indicating its desire to maintain an indirect presence in Europe.

In summary, while MiCA entails higher compliance costs, its long-term implications for the crypto market could be beneficial, attracting institutional investors and facilitating the acceptance of euro-pegged stablecoins. As the EU advances these regulations, the U.S. is anticipated to develop its own crypto legislation under the upcoming Donald Trump administration, as added by the analysts.