Introduction of the MiCA Law: Restrictions for Cryptocurrencies in the European Union

On June 30, 2024, the law on regulating cryptocurrencies Markets in Crypto-Assets (MiCA) comes into force in the European Union. The law introduces significant changes to the EU cryptocurrency industry, setting strict rules for stablecoins and other crypto assets, as well as exchange platforms. According to information from The Block, the new regulations will affect a wide range of market participants.

One of the key aspects of the MiCA law is the regulation of stablecoins. MEPs passed a bill to regulate cryptocurrencies in April last year, making the EU one of the first jurisdictions in the world with comprehensive regulations on cryptoassets.

Experts warn of possible negative consequences for stablecoins. Head of research at Outlier Ventures Jasper De Maere noted that some companies may curtail their activities in the EU. Restrictions introduced by MiCA may result in reduced liquidity and limited access to trading, which will adversely affect EU citizens.

According to Jasper De Maere, the maximum trading volume will be limited to €200 million, which is significantly less than the average monthly trading volume of the USDT stablecoin, which is approximately $30 billion. This could impact access to more exotic investment opportunities related to cryptocurrencies.

The introduction of MiCA has already led to some cryptocurrency exchanges beginning to introduce restrictions on the use of stablecoins. In March, OKX, the fourth-largest crypto exchange by trading volume, suspended trading of the stablecoin Tether (USDT) for users in the European Union. In early June, the Binance exchange announced that it would limit access to “unregulated stablecoins” for EU clients, which could also affect USDT.

Binance emphasized that regulation of stablecoins will be carried out in EU countries, and only certain regulated companies will be able to issue and offer stablecoins. Binance also plans to limit a number of services related to “unregulated stablecoins”, and the copy trading service and participation in the Launchpad and Launchpool programs will be unavailable to European clients.

Crypto exchange Bitstamp said it will delist Tether's euro-pegged stablecoin EURT and other stablecoins that do not comply with new EU crypto asset laws by June 30.

The MiCA law represents an important step in the regulation of cryptocurrencies in the European Union, but it also causes significant changes and restrictions for market participants. The introduction of strict regulations for stablecoins and other crypto assets may impact liquidity and the availability of trading opportunities for EU citizens, which requires careful consideration and adaptation by businesses.