Europe is on the cusp of significant transformations in the stablecoin market due to impending Markets in Crypto Assets (MiCA) regulations. These regulations are expected to create a more favorable environment for euro-backed stablecoins. Binance has already announced restrictions on stablecoins that do not meet the new MiCA standards, and Kraken is evaluating its stablecoin offerings to ensure compliance with EU criteria, potentially resulting in the delisting of certain stablecoins for EU customers.
Despite Europe lagging behind the US and APAC regions in terms of adoption, euro-backed stablecoins have experienced a surge in trading volume since the beginning of the year. The combined weekly volume of popular euro stablecoins, such as Tether’s EURT, Stasis EURS, and Circle’s EURCV, has exceeded $40 million since March, indicating a growing demand within European markets. AEUR, introduced by Binance in December, has quickly become the dominant player in the euro stablecoin sector, representing over half of the total volume.
While USD-backed stablecoins still dominate the market with an average weekly volume of $270 billion in 2024, euro-backed stablecoins have captured a 1.1% transaction share, a significant increase from virtually none in 2020. Trading pairs of USDT against the euro have become some of the most traded instruments, surpassing even EUR-denominated Bitcoin trading on platforms like Binance and Kraken, underscoring their importance as key fiat gateways for European traders.
The specific stablecoins that will be deemed unauthorized under the new regulations have not been disclosed. However, Kraken’s review of Tether’s USDT, the world’s largest stablecoin, is noteworthy given its past regulatory challenges. Despite the majority of USDT trading occurring during US market hours, it remains a crucial asset for European traders. Over-the-counter (OTC) trading is expected to maintain USDT-EUR liquidity, but there is a growing trend towards regulated alternatives like USDC as a preferred option for many traders.
In conclusion, the impending MiCA regulations are set to reshape the stablecoin landscape in Europe, leading to a more favorable environment for euro-backed stablecoins. The surge in trading volume of euro stablecoins since the year’s start indicates a growing demand within European markets. While USD-backed stablecoins continue to dominate the market, euro-backed stablecoins have carved out a significant transaction share and have become key assets for European traders. The shift towards regulated alternatives like USDC as a preferred option signals a potential future trend in the stablecoin market.
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