Euro Stablecoins to Thrive Under New EU MiCA Guidelines

Euro Stablecoins to Thrive Under New EU MiCA Guidelines

The impending launch of the European Union’s Markets in Crypto-Assets (MiCA) regulation is expected to significantly boost the adoption of Euro-backed stablecoins. According to a recent report by Kaiko Research, the MiCA guidelines, set to take effect by the end of June, will provide much-needed regulatory clarity for stablecoins, encouraging their use within the EU.

Several cryptocurrency exchanges, including Binance and Kraken, are currently reviewing their stablecoin offerings to ensure compliance with the MiCA regulation. This process may result in the delisting of some stablecoins that fail to meet the new standards, but it also presents an opportunity for Euro-pegged stablecoins to thrive.

Euro-backed stablecoins have seen a marked increase in market cap and trading volume this year. Top Euro-pegged stablecoins, such as Tether’s EURT, Stasis’ EURS, Société Générale’s EURCV, Anchored’s AEUR, and Circle’s EURCV, have consistently recorded a combined $40 million in weekly trading volume. AEUR, launched on Binance last year, accounts for over 50% of this volume.

Since March, Euro-backed stablecoins have captured around 1.1% of all crypto trading transactions in Euro, a notable rise from 2020 when they had virtually no market share. Despite this growth, Euro stablecoins still lag significantly behind fiat transactions, which account for 98.9% of Euro-based crypto trades.

The introduction of MiCA might not benefit all stablecoins equally. Tether USDT, the largest stablecoin by market cap, could face challenges with the new regulation. Kraken, for example, is reportedly reassessing its listing of USDT.

Globally, USD-pegged stablecoins remain dominant, with an average trading volume of $270 billion in 2024 and a market cap of approximately $162 billion. These stablecoins command 90% of USD crypto transactions, reflecting their strong market position.

The growth of the Euro stablecoin market aligns with the broader expansion of the global stablecoin market, which has seen increased capital inflows. Factors such as high interest rates, inflation concerns, recession fears, and geopolitical conflicts are driving institutional investors towards crypto as a portfolio diversification strategy. Stablecoins provide a viable entry point for these investors.

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