End of stablecoins? Why exchanges are abandoning stablecoins in EU

Markets in Crypto-Assets (MiCA) regulation is about to be implemented, and digital asset exchanges are preparing to comply.

The new law’s requirements aim to protect investors, prevent financial crime, and ensure transparency. How are crypto exchanges reconsidering the options for European traders in light of recent events?

Table of Contents

• What is known about MiCA
• How MiCA classifies stablecoins
• Which crypto exchanges are abandoning stablecoins in Europe
• What is going to change in Europe with MiCA

What is known about MiCA

The European stablecoin regulation will come into force on 30 June, while the European Banking Authority (EBA) and the European Securities Market Authority (ESMA) are consulting on implementing the new rules.

MiCA requires stablecoin issuers to be registered within the EU. However, the issue about how the law will apply to decentralized and foreign issuers remains unsolved. EBA representatives emphasized that there will be no grace period for stablecoins that are already entering the market.

How MiCA classifies stablecoins

Only a tiny proportion of European institutional funds have access to cryptocurrency, mostly due to regulatory uncertainty. However, the emergence of MiCA is likely to assuage these concerns by encouraging leading EU banks to offer services such as custody, trading, and issuance of e-money tokens or stablecoins.

MiCA also requires stablecoin issuers to maintain sufficient reserves. According to EBA Chairman José Manuel Campa, the agency will pay particular attention to the diversification of these funds. Operators need to, among other things, eliminate conflicts of interest and display the connection of storage facilities with trading platforms.

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Which crypto exchanges are abandoning stablecoins in Europe

Uphold

Starting July 1, Uphold will stop supporting USDT, DAI, FRAX, GUSD, USDP, and TUSD stablecoins for users from the European Economic Area (EEA) to comply with MiCA requirements.

#Mica #stablecoin regulations mean not all $USD stablecoins are treated equally .. interesting to see which are ok 👍 pic.twitter.com/4hJEL4T24n

— Antony Welfare (@AntonyWelfare) June 17, 2024

Owners of stablecoins must convert them into other assets by June 28. Otherwise, the excluded cryptocurrencies will be automatically replaced with USD Coin (USDC). The platform will also continue to support EURC from Circle and PYUSD from PayPal.

Binance

Binance announced that it will restrict access to unauthorized stablecoins for users in the EEA from June 30. This is due to the provisions of the MiCA regulations regarding this category of assets.

Under upcoming MiCA rules some stablecoins will face restrictions as unauthorized stablecoins.

Binance won’t delist any unauthorized stablecoins on spot but will limit their availability for EEA users only on certain products, such as launchpool and earn, and will propose…

— Binance (@binance) June 3, 2024

The remaining assets from this category will fall into the unauthorized section. Binance admitted that some of the existing stablecoins could receive this status.

According to the official release, the exchange is introducing a phased plan for the transition to regulated assets. Specifically, the platform will restrict access to unauthorized stablecoins across all of its products for EEA customers from June 30.

Moreover, restrictions will apply to the copy trading service. Users are advised to close positions and withdraw funds before June 29. Also, traders from the EEA will no longer have access to the FDUSD pool.

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Kraken

Bloomberg recently reported that Kraken would stop supporting USDT in Europe in May. Journalists note that the exchange’s decision may be related to adopting European rules for regulating the cryptocurrency industry.

In response to the plans of the Kraken cryptocurrency platform, representatives of Tether, the issuer of USDT, said that they want”exchanges to maintain a stablecoin for the withdrawal of funds and deposits.

The company also recalled that its chief executive officer, Paolo Ardoino, had already expressed concern about certain aspects of MiCA’s requirements and stated that Tether would continue to work with the regulatory authorities of the European Union.

However, Patrick Sutton, Head of Communications at Kraken, later denied Bloomberg’s statement in a comment to crypto.news.

“There are no plans to delist Tether or alter our USDT trading pairs. As a leading crypto exchange, we are constantly evaluating our global strategy and operations to ensure that we remain compliant now and in the future. We are committed to following the rules as we continue our mission of accelerating the adoption of this asset class.”

Patrick Sutton, Head of Communications at Kraken

The firm’s head of growth and asset management, Mark Greenberg, also said Kraken will continue to serve payments and trading pairs with the USDT stablecoin in Europe.

Let’s be clear: @krakenfx continues to list USDT in Europe and we have no plans to delist at this time.

We know our European clients value access to USDT and we continue to look at all options to offer USDT under the upcoming regime.

We will of course follow all legal…

— Mark Greenberg (@marklg) May 18, 2024

Greenberg noted that Kraken will follow all legal requirements. But since the rules have yet to be approved, the company is doing its best to offer popular stablecoins to European customers, he said.

OKX

Since March 14, the OKX crypto exchange has deprived European users of trading pairs with the stablecoin USDT.

OKX’s decision is likely due to the fact that MiCA includes a clause for the mandatory licensing of stablecoin operators. The crypto exchange does not have such permission. Therefore, her team decided to be proactive in order to avoid falling under regulatory pressure.

As an alternative to Tether’s first and most popular stablecoin, the OKX team offered European users USDC, an eternal competitor to USDT.

What is going to change in Europe with MiCA

For crypto investors, MiCA offers appreciated regulatory insights that can shape the trajectory of digital asset regulation.

MiCA is meant to bring clarity to one of the world’s largest markets, making the EU an even more attractive place for web3 companies to innovate and attract talent. Regulatory clarity drives innovation and market competitiveness, providing the confidence and certainty that both investors and businesses need.

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