The European Union’s Market in Crypto Assets Regulation (“MiCA”) came fully into force on 30 December 2024. Making the 27 bloc intergovernmental organisation the first major jurisdiction to establish a major regulation of crypto assets. The aim is to create harmonized rules for crypto asset issuers and providers, leading to a more efficient system for service providers operating in the internal market. While
numerous benefits exist for investors, and crypto operators, there have been consequences as a result of the Regulation’s implementation. Recently, the stablecoin Tether (USDT) was delisted from major crypto exchange platforms in Europe. This entry aims to inform investors of the role of MiCa, why USDT was delisted from the internal market and what alternatives exist for buyers.
Crypto-Assets Regulated under MiCA
The Regulation is applicable to three asset groups; E-money tokens, Asset-referenced token, and utility tokens.
E-money tokens are defined as crypto-assets of which their value is pegged to an official currency, thus leading to them holding a stable value. These are often referred to as “stablecoins”, and are often provided as an alternative to highly volatile cryptos such as Bitcoin and Ethereum. Key examples of stable coins are USDT (Tether), USDC (Circle) and EURC (Circle). The rules pertaining to e-money tokens are laid out in Title IV of the Regulation.
Asset-referenced tokens (ARTs) are cryptos which are not e-money tokens, by referencing another value, right or a combination of the two. These cryptos can link their value to oil prices or a group of cryptocurrencies. A prominent example of an asset-referenced token is PAX Gold which pegs its value to the price of gold. The rules pertaining to ARTs are laid out in Title III of the Regulation.
Utility tokens are assets which are intended to provide access to goods and services which the issuer supplies. An example of such is LINK tokens, which are used as the payment method for services that Chainlink provides.
Other assets are those which do not fall within any of the three categories. These include cryptos such as Bitcoin.
What Rules Must Issuers and Providers Follow?
Providers and issuers of E-money tokens and ARTs must abide by certain rules in the Regulation. As mentioned previously, the rules regarding e-money tokens are outlined in Title IV while those for ARTs are outlined in Title III.
For e-money tokens, all issuers and providers must be authorised by ESMA and render a white paper to the authorities. This white paper includes information regarding the issuer, the e-money token, the offer to the public, rights and obligations attached to the token, the underlying technology used, risks and environmental impact of the mechanism used to issue the token. This is similar to the white papers issued regarding other securities and investments such as ETFs, and are intended to ensure consumers have the information necessary before investing in a coin. E-money token providers are prohibited from granting interest on the coins. Furthermore, issuers are under the obligation of good faith, meaning, they must act with the best interest of the asset holders in mind.
For asset referenced tokens, a white paper must be issued providing the same information as with e-money tokens. Providers and issuers must apply for authorisation. For assets worth more than a hundred million euros, a quarterly report must be given to ESMA outlining, the number of holders, the token’s value and size, the average number of daily transactions, and an estimation of the average and aggregate value of transactions which are used as a means of exchange within the single currency area. Issuers are obliged to maintain a reserve of assets which can only be invested into highly liquid and low risk financial instruments. Similar to e-money tokens, interest cannot be granted on ARTs and the obligation of acting with the best interest of asset holders is present.
What is clear based on the obligations outlined, the EU aims to provide more transparency and protection for users. The white papers will provide information which asset buyers can utilize to be aware of any risks before buying a coin.
Furthermore, by requiring larger coin providers to inform ESMA quarterly of certain information, regulators can identify any red flags which may cause consumer harm.
USDT Delisted From Major Crypto Platforms
On the 31st January of this year, Crypto.com delisted Tether alongside nine other tokens in order to comply with MiCa. This came after other platforms such as Coinbase had already delisted the coin, due to Tether’s non-compliance with the Regulation. Paolo Ardoino, Tether’s CEO defended the refusal to comply, claiming that the Regulation is dangerous for stablecoins. The main point of contention comes from the requirement for 60% of the stablecoin’s reserve to be kept in European banks. The issue lies with being forced to over rely on traditional banks which could lead to a banking and stablecoin crisis occurring simultaneously.
Ardoino has taken further issue with the EU's direction regarding the digital euro, claiming that the “European Central Bank is more interested [in pushing] the digital euro as a way to control people and control how they spend their money.”
Based on these concerns, there is no indication that either Tether or the EU regulators will change course in their approach towards MiCa. Thus leading to major crypto platforms such as Bitvavo and Binance delisting the coin which provides European crypto users with less choice in regards to stablecoins.
Users of Tether can still hold the coin, however, they cannot trade it on the exchange platforms, which renders them less useful.
Alternatives for European Crypto Buyers
With Tether off the European market, there are alternatives which buyers can utilise instead.
Firstly, USDC by Circle is MiCA compliant. This coin can be found on all major exchange platforms and is designed to be transparent. Secondly, for those who wish to buy a digital euro coin, EURC, also by Circle, meets MiCA rules and is an option which European users can use for their EU transactions.
Conclusion While MiCa has provided transparency and protection for European crypto buyers, it has also led to less consumer choice, as certain popular coins such as USDT are now delisted from the market due to their refusal to comply with the Regulation. In the meantime, European users can switch to alternatives such as USDC and EURC.
📚 Sources
- Stibbe – The MiCA Regulation Explained: What Has Changed Since June 2024?
https://www.stibbe.com/publications-and-insights/the-mica-regulation-explained-what-has-changed-since-june-2024 - Global Government Fintech – EU Crypto Regulation MiCA Comes Fully Into Force
https://www.globalgovernmentfintech.com/eu-crypto-regulation-mica-fully-into-force - EUR-Lex – Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1114 - Cointelegraph – Tether CEO Defends Decision to Skip MiCA Registration for USDT
https://cointelegraph.com/news/tether-ceo-defends-decision-to-skip-mi-ca-registration-for-usdt - CoinMarketCap – Crypto.com To Delist Tether USDT and 9 Other Tokens in Europe by January 31 To Comply with MiCA Regulations
https://coinmarketcap.com/academy/article/cryptocom-to-delist-tether-usdt-and-9-other-tokens-in-europe-by-january-31-to-comply-with-mica-regulations - TradingView – Why Tether Refuses to Comply with MiCA
https://www.tradingview.com/news/cointelegraph:ca75a2328094b:0-why-tether-refuses-to-comply-with-mica - CCN – USDT Being Delisted in Europe? MiCA-Compliant Stablecoin Alternatives To Consider
https://www.ccn.com/education/crypto/usdt-delisting-in-europe-mica-stablecoin-alternatives-for-european-users - Investx – Tether CEO Explains Why USDC Won’t Comply with MiCA
https://investx.fr/en/crypto-news/tether-ceo-usdt-mica-noncompliance
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