Circle announced that its USDC and EURC stablecoins are now compliant with the new EU stablecoin regulations, making it the first global stablecoin issuer to adhere to the MiCA regulations. Starting July 1st, Circle officially began issuing these stablecoins to its European clientele.
This marks a significant milestone in the development of the internet financial system, signifying the establishment of clear regulations in one of the world’s largest economic entities to legitimize stablecoins as legal electronic currencies. This move is set to propel the cryptocurrency market into a new phase of mainstream adoption in payments, finance, and commercial infrastructure.
Earlier, Aiying published a comprehensive analysis in the article “MiCA Regulation in Europe: In-Depth Impact on Web3 Industry, DeFi, Stablecoins, and ICO Projects,” highlighting the profound implications of the regulation for the industry, particularly the stablecoin market. MiCA mandates that stablecoins backed by fiat currencies must maintain sufficient liquidity reserves and obtain an Electronic Money Institution (EMI) license. Additionally, it sets limits on transaction volumes and other asset support requirements, with June 30th marking a pivotal deadline for exchanges to delist non-compliant stablecoins.
Circle’s USDC is poised to capture market share from larger competitors like Tether Holdings Ltd.’s USDT. Exchanges such as OKX, Binance, Bitstamp, and Kraken have adjusted their support for USDT in the EU recently, discontinuing its use for purchasing or selling other cryptocurrencies.
Circle’s opportunity mirrors historical parallels with USDT’s rise, as discussed in Aiying’s article “The Stablecoin Race: Models, Operational Principles, Trends, and Reflections on Hong Kong Stablecoins.” It pointed out USDT’s initial advantage in being first to market, bolstered by exchange endorsements and market upswings. Its strategic entry into the market coincided with significant cryptocurrency market growth, leveraging its holdings and market capitalization since its establishment in 2014, but particularly gaining prominence in 2017 amid a bull market, despite criticism for influencing Bitcoin prices.
However, this narrative often overlooks causal relationships. Notably, China’s closure of virtual currency exchanges and USDT’s simultaneous listing on the top three exchanges were pivotal. Similarly today, data from Chainalysis’ “2023 Geographic Report on Cryptocurrency” highlights the region’s dominance from July 2022 to June 2023, now further facilitated by the MiCA legislation which has cleared the way for Circle.
The rise of Circle, driven by the growth and almost certain adoption of the Euro digital currency, aligns seamlessly with the provisions of the MiCA regulation. This regulation establishes clear rules for the issuance and operation of Euro stablecoins, positioning them as core products and services for banks and electronic money institutions across Europe. This regulatory framework significantly expands the application of stablecoins in commercial and financial sectors, representing a vast market opportunity as seen by Aiying.
Circle’s global compliance vision and starting point have established it as a leader in the crypto space. USDC’s ascent during the USDT crisis, backed by transparent, regulated, and more liquid asset reserves, has garnered customer favor. Notably, USDC’s growth correlated inversely with USDT holdings during times of risk, amplified by early compliance on Coinbase, which bolstered its market expansion and competitive edge against USDT.
Circle’s regulatory groundwork spans globally. It operates under the Financial Crimes Enforcement Network (FinCEN) as a money services business and complies with state laws on money transmission. Unlike USDT, USDC’s reserves are independent and safeguarded under New York banking and federal bankruptcy laws.
Two years ago, the EU adopted the MiCA framework, subsequently approved by the European Parliament, making it the most comprehensive global regulation for stablecoins and digital asset markets. Circle promptly announced the launch of the Euro stablecoin and ensured compliance with EU regulations. The decision to establish its European headquarters in France, a pioneer in crypto and digital asset regulation, underscores Circle’s strategic foresight. Collaboration with France’s financial regulatory body ACPR has ensured MiCA compliance.
Circle has secured ACPR’s license for electronic money issuance and emerged as a MiCA-compliant issuer of USDC and EURC stablecoins. European customers can now access USDC and EURC directly through Circle Mint France.
USDC has thereby become the sole major stablecoin compliant with the new EU stablecoin regulatory regime. Circle’s collaboration with regulators in France, the EU, and the US ensures full interchangeability of global stablecoins on blockchain networks, maintaining both technological innovation and strict regulatory standards.
Currently, all circulating USDC and EURC in Europe comply with MiCA regulations. EURC reserves held by Circle in France are supervised by local regulatory authorities, while USDC reserves held by globally systemically important banks are managed within the EU. European users retain full global fungibility of USDC for trading, transfers, self-custody, and DeFi applications without any changes.
In addition, it’s important to note that direct exchanges of USDC with individuals are not facilitated. Unlike USDT, which allows exchanges for amounts over $100,000 upon payment of a registration fee, Circle operates on a tiered basis. Only partners or Class A users (exchanges, financial institutions) qualify for direct exchanges with Circle, while individual retail users (Class B) must use third-party channels like Coinbase. Starting today, Circle will issue and redeem USDC and EURC directly through major institutions in the European market via Circle Mint France, including exchanges, market makers, brokers, consumer wallets, fintech firms, payment institutions, banks, and large enterprises. This market sales model significantly reduces the risk of money laundering for users, effectively managing and isolating risks through robust management on the enterprise level.
In summary, the launch of the MiCA regulation heralds a significant structural shift in market dynamics. Over the next year, major jurisdictions globally (including Japan, the US, UK, Singapore, Hong Kong, UAE, Brazil, etc.) are expected to introduce comprehensive stablecoin rules, necessitating stringent regulatory compliance. The grey market space of the wild era of cryptocurrencies continues to diminish, converging towards a fully compliant regulatory market. We are all witnesses to this transformation in the financial era.
