With the progress of the bill called MiCA (Markets in Crypto Assets), all dollar-backed stablecoins could have major restrictions in the European Union. Against this, lobbyists sent a letter about the impact this decision could have. signed by Blockchain for Europe and for Digital Euro Associationthe document points out that the three largest stablecoins on the market, Tether (USDT), USDCoin (USDC) and Binance USD (BUSD) account for almost 3/4 of the sector’s global trading volume.
“Restricting its use in the eurozone would bring cryptocurrency markets to a halt, with potentially destabilizing effects and a large outflow of cryptocurrency activities outside the European Union.”
While there are euro-backed stablecoins such as Circle’s Euro Coin (EUROC) and Euro Stasis (EURS), their relevance to the market is almost nil when compared to the others above.
European Union may ban biggest stablecoins from the market
As the most comprehensive bill in the world, MiCA must fully cover the cryptocurrency sector, and can be replicated by countries other than the 27 that make up the European Union. Despite this, not everyone agrees with the current state of the guidelines. Already approved and awaiting final details, one of the points addressed is stablecoins, which would have restrictions if they use foreign currencies such as the dollar in all or part of their composition. The reason is the fear that these currencies will become a standard in the region, causing economic stress with a possible fall in the euro. Therefore, coins such as Tether (USDT) that today have a greater volume than Bitcoin and Ethereum, run the risk of being banned from the European Union, causing a separation of this market that, until now, is seen as global.
“The trading volume per day globally using USDT is around $53 billion, $9 billion for USDC and $7 billion for BUSD. The figures for the Eurozone are estimated to be a quarter of that, surpassing the €200 million threshold by an order of magnitude.”
Volume of the largest stablecoins on the market, in percentage. Source: Crypto Compare / Blockchain for Europe.
Industry may leave Europe, say lobbyists
So, there are two scenarios. Euro-backed stablecoins could grow to be comparable to dollar par, or the industry could leave Europe in search of freer land.
“Furthermore, competition and, subsequently, innovation would be hampered as small and medium-sized exchanges struggle to attract sufficient liquidity”defends the lobbyists’ letter. “Small cryptocurrency projects will face higher barriers to having their tokens listed, which would slow the pace of innovation.”
Regarding the other option, the document points out that the Stasis Euro (EURS) has a small market cap, of only US$123 million against the US$67.5 billion of Tether and the US$52.4 billion of the USDC. Finally, the call is for greater clarity on the issuance and use of stablecoins — called electronic money tokens (EMTs) — excluding trades against cryptocurrencies on exchanges and DeFi pools. After all, the European Union’s biggest fear is that these foreign currency-backed stablecoins will become a payment standard, which could reduce the demand, use and value of its local currency, the euro.
