In a recent discussion with Merkle Science Policy Director Natalia Latka, insights were shared on how the upcoming Markets in Crypto-Assets Regulation (MiCA) might affect USDT and other stablecoins in the European Union.
One of the notable developments in response to MiCA is OKX's action to remove all USDT trading pairs from their platform to ensure compliance with the upcoming regulation. This move has prompted speculation on how other major exchanges will react as MiCA is scheduled to come into effect in June.
MiCA introduces licensing requirements for crypto-asset service providers, issuers of asset-referenced tokens, and issuers of electronic money tokens in the EU. Moreover, it establishes a market abuse regime that bans market manipulation and insider trading while providing a framework for competent authorities' powers, cooperation, and sanctions. Under this regulation, only authorized legal entities with offices in the EU can offer crypto-asset services.
Key actors like significant crypto-asset service providers and issuers of ARTs and EMTs face additional scrutiny and regulatory obligations due to their potential impact on financial stability and consumer protection.
To further understand the implications of MiCA on USDT, Merkle Science's Natalia Latka emphasized that Tether would fall under the category of electronic money tokens and must meet the specified criteria for EMT issuers within MiCA. This entails going through an authorization process as an electronic money institution or credit institution and establishing a legally recognized entity in the EU.
Given Tether's market cap and user base, it is likely to be considered a significant e-money token, subjecting it to stricter requirements. These include meeting higher capital requirements, adhering to interoperability standards, and developing a comprehensive liquidity management policy to ensure compliance and operational effectiveness within the EU.
Moving forward, the entry of non-EU stablecoins into the EU market may be influenced by MiCA compliance requirements, potentially reshaping global standards for stablecoin regulation. Nevertheless, due to the dominant position of USD-referencing stablecoins in the market, a rapid shift towards Euro-pegged stablecoins or their increased trading volume in the EU seems unlikely in the near future, despite potential alterations in the market landscape.
