Coinbase Cuts USDC Rewards in EU Due to MICA Regulation

Coinbase is winding down its USDC Rewards program for users in the European Economic Area (EEA) to comply with the Markets in Crypto Assets Regulation (MiCA), which went into effect on June 30.

The exchange said that MiCA regulation will affect e-money tokens. With more regulations, more enforcement will follow.

The move was first shared by Marina Markezic, an X (formerly Twitter) user, on November 28. In an email sent to users who may be affected by the change, Coinbase stated that users will still be able to earn rewards until November 30 before it officially suspends the program on December 1.

More EU Regulations

Coinbase will distribute the final USDC Rewards payout for impacted users within the first 10 business days of December.

Launched on November 20, the USDC Rewards program allows users to earn an annual percentage yield of around 4.7% by holding USDC in their Coinbase Wallet. Rewards are paid out monthly, directly into users’ wallets, and there are no lock-up periods required.

Through the program, Coinbase aims to promote the use of stablecoins while providing users with a way to earn passive income on their digital assets. The program is available to users in various regions worldwide, although specific eligibility may depend on local regulations and requirements.

Earlier in October, the exchange said it will delist certain stablecoins that fail to meet the new compliance standards by year’s end. That raises concerns about Coinbase’s potential removal of Tether’s USDT, the leading stablecoin by market cap, though the exchange has not yet officially confirmed that.

The MiCA regulation introduces stringent standards for stablecoin issuers, focusing on transparency, liquidity, and consumer protection. These requirements are aimed at enhancing the stability and reliability of stablecoins within the EU market

The rules are set to come into full force on December 30, 2024. To prepare for its full implementation, several major cryptocurrency exchanges have ended support for non-compliant stablecoins.

OKX has taken steps to limit the availability of non-compliant stablecoins, while Bitstamp and Uphold both have imposed restrictions on these tokens, including USDT.

Other platforms are also reassessing their stablecoin offerings as part of their efforts to comply with MiCA regulations.

Tether to Shift Focus to MiCA-compliant stablecoins

As the largest stablecoin with $133 billion in market value, a delisting from a major exchange like Coinbase could impact USDT’s liquidity and trading volumes in the EEA.

The potential removal also gives an edge to competitors like Circle’s USDC, one of the few stablecoins that is fully compliant with the MiCA in the European Union. The second-largest stablecoin could capitalize on this opportunity to gain market share, especially in the European Union.

In response to the delisting speculation, Tether announced Wednesday the discontinuation of support for its euro-pegged stablecoin, EURT. The firm said the decision was made due to regulatory changes associated with the MiCA regulation.

Minting new EURT has been suspended since 2022, according to Tether. As part of the shutdown, holders are urged to redeem their tokens by November 27, 2025.

The firm said it is now focusing on developing stablecoins that comply with MiCA regulations. Tether and Quantoz Payments are working on EURQ and USDQ, its claimed MiCA-compliant stablecoins backed by Tether’s Hadron technology.

Tether has faced scrutiny regarding its reserve practices and transparency. MiCA regulations will likely require Tether to enhance its disclosures and undergo audits, which could affect its operational flexibility in Europe.

Tether’s CEO, Paolo Ardoino, previously explained that MiCA’s stringent cash reserve requirements could pose systemic risks to both banks and digital assets. While Ardoino praised the EU lawmakers’ efforts to set forth a clear legal framework for digital assets, he was also concerned about its side effect on Tether’s business model.