Best MiCA Stablecoins: Which Coins Are Regulated in the EU?

Among leading stablecoins, only Circle’s USD Coin (USDC) and EURC have achieved The European Union’s Markets in Crypto-Assets Regulation (MiCA) compliance, ensuring their continued availability in the EEA. In contrast, Tether (USDT) and MakerDAO’s DAI have not met MiCA requirements, limiting their use in the European Economic Area (EEA).

Effective June 30, 2024, MiCA requires stablecoins to be issued by entities with an Electronic Money Institution (EMI) license or equivalent authorization. This has led major exchanges like Binance and Coinbase to restrict or delist non-compliant stablecoins for EEA users.

What requirements does MiCA introduce?

Markets in Crypto-Assets Regulation (MiCA) introduced a broad selection of requirements that stablecoins issuers will have to abide by if they want to service the EEA market. We’ve collected the most important and relevant information from the official MiCA documentation to give you a quick rundown.

Stablecoin classifications

MiCA classifies stablecoins into two main types: e-money tokens (EMTs) and asset-referenced tokens (ARTs):

• E-money tokens: These are crypto-assets that aim to stabilize their value by referencing a single official currency. They function similarly to electronic money. Fiat-backed stablecoins like Tether and USD Coin fall within this category. 
• Asset-referenced tokens: These stablecoins aim to stabilize their value by referencing multiple assets, such as a basket of currencies, commodities, or other crypto assets. Decentralized stablecoins, such as DAI, or algorithmic stablecoins fall within this category.

Requirements for stablecoin issuers

Issuers must ensure the reserve assets are securely and adequately managed, segregated from the issuer’s own assets, and not pledged as collateral. There are additional requirements for different types of stablecoins:

• E-money tokens: Issuers must provide holders with a claim against the issuer at any time and at the same value as the currency referenced by the tokens. Issuers of e-money tokens must be authorized as credit institution or as an electronic money institution (EMI).
• Asset-referenced tokens: Issuers must maintain a reserve of assets to back the value of the tokens. This reserve must cover market and currency risks. Issuers of asset-referenced tokens must obtain authorization from the relevant authority and have their white paper approved before offering tokens to the public.

Significant stablecoins

Stablecoins that meet at least 3 of the certain criteria, such as having a large customer base, high market capitalization, or a large number of transactions, are deemed significant. While the regulation doesn’t specifically name which stablecoins are significant, we can assume that this part of the legislation is targeting stablecoins with a high market cap, like Tether and USD Coin.

Since significant stablecoins pose greater risks to financial stability and monetary policy, they are subject to more rigorous oversight. Issuers of significant stablecoins must abide by higher capital requirements, liquidity management policies, and interoperability requirements.

Here are some of the most important notes about significant stablecoins, as defined by MiCA:

• The number of token holders is greater than 10 million.
• The market cap is higher than €5 billion.
• The average daily transactions number is higher than 2.5 million.
• The average daily transaction volume is higher than €500 million. 

Currently, only three stablecoins tick at least 3 of the boxes: Tether, USD Coin, and Multi-Collateral DAI.

What does the MiCA regulation mean for major stablecoins?

Currently, there is limited information on which stablecoin issuers have successfully filed for licenses under MiCA or how authorities are evaluating them. However, we know that Tether and MakerDAO’s DAI have yet to comply with MiCA regulations, while Circle’s USDC has already secured compliance and authorization to operate within the EEA. Insights can still be drawn from statements by major stablecoin companies and the actions of cryptocurrency exchanges adapting to the regulatory changes in recent months.

USD Coin

USD Coin (USDC) is the second-largest stable digital currency in the market with a total valuation of $39 billion as of this writing. USDC is a stablecoin managed by Circle, a financial technology company. Circle partnered with Coinbase to create USDC. The collaboration resulted in the establishment of the Centre Consortium, which governs the issuance and redemption of USDC. 

Circle applied for an EMI license and got approved on July 1, 2024. That means that USDC is the only major stablecoin that is still permitted to be traded on exchanges in the EEA.

Circle also issues a euro-backed stablecoin, EURC. While it is the biggest EUR stablecoin, it still comes nowhere close to USD giants in terms of market capitalization, sitting at only $90 million. However, that might change now that USDT and DAI are leaving the European market.

Even though Circle’s USDC can still be traded on European exchanges, MiCA regulations have ended the possibility of earning yield rewards for stablecoin holders. That led to Coinbase announcing the end of their USDC yield offerings, and it’s likely that other exchanges offering USDC yield rewards will soon follow.

Current Status: USDC is the only major stablecoin still trading on major European exchanges, as they obtained their EMI license on July 1, 2024. However, holders will no longer be able to earn yield rewards due to MiCA regulations.

Tether

Tether (USDT) is by far the largest stablecoin in the sector, commanding a $130.8 billion market cap (out of the total stablecoin market cap of $182.4 billion). Several top crypto exchanges have already delisted or restricted Tether’s USDT in the European Economic Area (EEA) to comply with MiCA regulations.

OKX removed USDT trading pairs for EEA users in early 2024, and Uphold delisted USDT alongside other stablecoins by the initial compliance deadline of June 30, 2024. Binance has also restricted the use of non-regulated stablecoins, and Coinbase plans to delist non-compliant stablecoins for users in the EEA, including USDT, by December 30, 2024.

Tether also announced the discontinuation of their euro-pegged stablecoin EURT on November 27, 2024, giving holders 1 year to redeem their tokens.

Current Status: USDT is very likely to be delisted or restricted on European exchanges, seeing as Tether still hasn’t managed to obtain an EMI license.

DAI

Multi-Collateral Dai (DAI) is a decentralized stablecoin that maintains its value and dollar peg by referencing several different assets, including Ethereum, USD Coin, and US treasuries. There’s little information available regarding how the EU legislators will handle DAI or whether Maker, the company that issues DAI, has made any effort toward complying with regulations.

According to the MiCA regulation, issuers of asset-referenced tokens (decentralized or algorithmic stablecoins) should have a registered office in the EU, which may prove difficult due to the decentralized nature of DAI.

Current Status: Some exchanges have already started delisting or restricting DAI for their European customers, but there is little information on whether or not Maker plans on obtaining an EMI license.

Which stablecoins are currently regulated?

As of writing, only a few companies are issuing fiat stablecoins under the EMI license. These authorized issuers are:

• Circle – USDC, EURC
• Stasis – EURS
• Monerium – EURe
• Membrane Finance – EUROe
• Quantoz Payments – USDQ, EURQ

Apart from Circle’s USDC and EURC, all of these stablecoins are very small, and it’s unreasonable to expect that they could shoulder the liquidity requirements of the entire stablecoin trading volume in the EEA.

The bottom line

Lately, we’ve seen a notable push from the regulators to introduce rules for stablecoins and cryptocurrencies. MiCA regulations pertaining to stable digital assets went into effect by the end of June, while the remaining regulations will step into effect by the end of 2024.

The European Union is not the only entity that’s expedited its crypto regulation efforts. Last year, we saw US regulators renew their stance toward crypto securities and go after exchanges like Binance and Kraken. On the flip side, we also saw the regulators approve spot Bitcoin ETFs in the US, which speaks to their willingness to accept cryptocurrencies.

As for MiCA, it’s worth noting that many experts have already expressed their doubts about the EU’s enforcement capabilities. Currently, it’s unclear in what capacity the EU authorities will go after stablecoin issuers that don’t follow the new rules.

In addition, it seems that USDC will be the only major stablecoin available to European traders, as Tether and DAI have already been delisted or restricted on many major exchanges. We’ve yet to see how the newly created Quantoz stablecoins will fare in the European market, so we cannot really evaluate them at the moment.