EU's MiCA Regulation Could Unleash Euro Stablecoin, Says JPMorgan
The European Union's Markets in Crypto-Assets (MiCA) regulation, effective since December 30, 2024, is expected to significantly increase the market share of euro-pegged stablecoins, according to analysts at JPMorgan.
Currently, euro-backed stablecoins hold a small 0.12% of the total stablecoin market. However, a report released Wednesday by JPMorgan analysts, led by Nikolaos Panigirtzoglou, suggests MiCA could change this landscape. The regulation may incentivize European banks and financial institutions to utilize euro stablecoins for both customer transactions and blockchain-based settlements.
Several European financial institutions are already exploring this space. The report highlighted Societe Generale's EURCV stablecoin and BBVA's planned stablecoin launch in partnership with Visa as prime examples of this growing trend.
MiCA mandates that only compliant stablecoins can operate within regulated EU markets. This regulatory shift presents a challenge for existing stablecoin issuers like Tether, forcing them to adapt to the new rules or withdraw from the EU market. Tether has already discontinued its EURT stablecoin, and its USDT stablecoin has been delisted from several EU-based exchanges. Despite these challenges, Tether maintains its global dominance, largely due to demand from regions with less stringent regulations, particularly in Asia, according to JPMorgan’s analysis. The report also pointed to Tether's strategic investments in MiCA-compliant firms like Quantoz Payments, indicating its intention to maintain a presence in the European market indirectly.
JPMorgan analysts believe that while MiCA introduces increased compliance costs for stablecoin issuers, its long-term impact on the cryptocurrency market could be beneficial. The regulation has the potential to attract institutional investors and drive wider adoption of euro-pegged stablecoins. The analysts also suggested that the EU's proactive approach to crypto regulation could prompt similar legislative efforts in other regions.
In conclusion, while the full impact of MiCA is yet to be seen, JPMorgan’s analysis indicates a potential shift in the stablecoin landscape, with euro-backed options poised for growth within the European market. The regulation has the potential to bring greater stability and institutional interest to the digital asset space.