Euro StableCoin Market Flourishes Under MiCA

Introduction of MiCA Regulations

The Markets in Crypto-Assets Regulation (MiCA) framework, a regulatory structure of the European Union, is progressively being enforced in accordance with its planned timeline. The first set of regulations, which came into effect on July 1, was primarily focused on stablecoins and their issuers. These explicit guidelines have not only purged the market of entities unable to meet the regulatory prerequisites but also fostered a conducive environment for stablecoins pegged to local currency.

Emergence of a New Partnership

An illustration of this is the recent collaboration between Next Generation, a fintech firm based in France, and Decta, an electronic money institution (EMI) located in Ireland. They have announced their intention to reintroduce a euro-pegged stablecoin, EURT, on the Stellar blockchain. According to the parties involved, this initiative, which was launched on Aug. 5, fully complies with MiCA.

Revival Under MiCA

Next Generation has strong connections with the well-known fintech entity Tempo France. This company initially introduced EURT in 2017 in partnership with the Stellar Foundation, pioneering one of the first euro-pegged stablecoins. However, the lack of a regulatory framework led to the project’s suspension. Under MiCA, stablecoins are categorized as electronic money tokens (EMTs), equating them with traditional e-money and requiring issuers to have an EMI license or be a credit institution. This regulatory clarity has revolutionized the euro-backed stablecoin market, making it more predictable and appealing to investors.

Increasing Popularity of Stablecoins?

Decta is already approved by the Central Bank of Ireland as an EMI, which it will use to license to issue EURT, ensuring complete regulatory compliance. Suren Hayriyan, the president of Next Generation, stated that the current demand for euro-backed stablecoins is around $30 billion with a supply of less than $300 million. The partnership aims to bridge this gap, with predictions indicating a significant growth trajectory for EURT. At the moment, the euro-back stablecoin market has major players such as Circle, with its EURC stablecoin and Tether’s EURT, which Hayriyan referred to as their “main competitors.”

Future Prospects

“However, our robust regulatory compliance and technological infrastructure position us strongly in this evolving market,” he said. Next Generation and Decta are targeting a launch of EURT by October. Circle became the first global stablecoin issuer to comply with MiCA and selected France as its European headquarters, citing the country’s “forward-looking” stance on digital asset regulation. The implementation of MiCA is anticipated to stimulate substantial growth in the euro-backed stablecoin sector. Market predictions forecast a minimum market capitalization of 15 euros by 2025, reaching 70 billion euros by 2026 and potentially surpassing 2 trillion euros by 2028.

Bottom Line

As of July 31, the market capitalization of stablecoins was on the rise, with an increase of 2.1% to $164 billion in July. This marked the highest levels since April 2022, and stablecoins such as USD Coin saw their trading volume increase by 48%. The activation of MiCA and the rise of euro-backed stablecoins indicate a promising future for the crypto market. However, it also raises questions about the potential risks and challenges that may come with this growth. What are your thoughts on this matter? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.