Crypto exchanges and issuers face a transformative shift as stablecoin removals occur in Europe.

The delisting of a leading stablecoin by one of the world’s largest cryptocurrency exchanges for an entire continent has caught the attention of many. However, this move could be just the beginning of a wave of disruptions as Europe’s groundbreaking regulatory regime, the Markets in Crypto-Assets Regulation (MiCA), comes into effect at the end of June. Off-shore stablecoins, in particular, may face significant challenges. Nevertheless, MiCA is expected to create a safer and stronger ecosystem for stablecoin issuers and users in the long run, according to sources. The recent delisting of Tether (USDT) trading pairs by Seychelles-based crypto-exchange OKX for users in the European Economic Area (EEA) ahead of MiCA did not come as a surprise to market observers. Christian Catalini, the founder of the Massachusetts Institute of Technology Cryptoeconomics Lab, commented that the stablecoin landscape will undergo substantial changes worldwide due to new regulations, and new players, many of which are traditional banking and fintech companies, will enter the market. Arvin Abraham, a partner at UK law firm Goodwin Procter, expects similar developments in the future and believes that the implementation of MiCA could lead to a significant transformation of the stablecoin landscape in the EEA. He suggests that current leaders in the stablecoin market may have to exit if they fail to comply with the regulations. Jean-Baptiste Graftieaux, the global CEO at France’s Bitstamp cryptocurrency exchange, stated that MiCA’s stringent requirements will undoubtedly impact stablecoin offerings in the European Union. The challenge for stablecoin issuers lies in the fact that they will need to be an EEA entity and authorized as an Electronic Money Institution firm. Existing stablecoin issuances face problems meeting the new regulatory requirements within the short timeline provided. Abraham pointed out that non-European stablecoin issuers will face the most significant unique cost of establishing an entity authorized in an EU member state. However, even for all issuers, there will be significant additional burdens, such as maintaining 1:1 reserves, providing permanent redemption rights to holders, and quarterly reporting to regulators for stablecoins with a value exceeding 100 million euros. Jon Helgi Elisson, co-founder and chairman of Monerium, a company issuing compliant on-chain fiat stablecoins in Europe, raised concerns about the lack of compliance among stablecoins offered in Europe today. He emphasized that coming into compliance could be extremely expensive for stablecoin issuers. With MiCA, stablecoin issuers will not only be required to maintain a 1:1 ratio of liquid reserves but also to segregate users’ funds, giving customers a claim on the underlying funds. Compliance demands will be greater for larger market-cap issuers. While the short-term impact of MiCA on the market, particularly for Tether as the most popular stablecoin globally, may be disruptive, it is expected that other compliant stablecoins will fill the void, creating a safer ecosystem with strong consumer protection and prudential safeguards. Crypto exchanges may also have to adapt to the new regulations, as some rely on stablecoins for transactions. Despite the short-term challenges, the MiCA framework is seen as a positive step towards market integrity and investor protection. It is seen as an example for other markets to follow, and its harmonization encourages cross-border innovation within the EU. MiCA presents a real opportunity for Europe and euro stablecoins, and it could pave the way for a new generation of stablecoin providers. In summary, while there may be short-term disruptions, the new EU crypto regulations have the potential to set an example for other markets and attract new entrants to challenge the dominance of dollar-backed stablecoins. Ultimately, regulatory clarity will determine which stablecoins can truly meet the needs of consumers and businesses at scale.