Impact of MiCA Regulations on Uphold and Stablecoins

European digital asset trading platform Uphold is set to discontinue support for six stablecoins from July 1 due to the new regulatory framework introduced by the European Union. The Markets in Crypto-Assets Act (MiCA) has prompted Uphold to cease its backing for USDT, GUSD, DAI, FRAX, TUSD, and USDP. Antony Welfare, the founder of the Commercialising Blockchain Research Centre (CBRC), recently shared a notification from Uphold regarding this change. According to the provided information, users are required to convert their holdings of these stablecoins to an alternative cryptocurrency by June 28, after which Uphold will automatically convert them to USD Coins (USDC). MiCA, which came into law in May 2023 and began implementation in June 2023, imposes stringent guidelines on fiat-backed stablecoins and e-money tokens. The regulation mandates a 1:1 ratio of liquid reserves to back stablecoins, held under custody by third parties to ensure compliance. Additionally, MiCA prohibits algorithmic stablecoins and demands licenses for stablecoin issuers in the EU. These regulations will be enforced in the European Economic Area from June 30, leading to adjustments in market listings by crypto exchanges like Uphold to adhere to the new rules. Binance has already categorized stablecoins as 'regulated' and 'unauthorized,' while OKX delisted Tether's USDT in Europe earlier, irrespective of MiCA. Reports in mid-May suggested that Kraken might delist USDT, but the exchange's global head dismissed these claims, stating they are exploring options to continue offering USDT in compliance with the regulations. Despite challenges faced by some stablecoins, those backed by the euro could benefit from MiCA, raising concerns among industry leaders about increased risks for EU-licensed stablecoins. The impact of MiCA on stablecoin issuers is not only intricate but also potentially risky under the new regulatory framework.