The European Union’s new MiCA regulations, effective December 30, are set to provide a significant boost to euro-backed stablecoins, according to a research report from JPMorgan (JPM) published Wednesday.
“MiCA mandates that only compliant stablecoins can function as trading pairs on regulated EU exchanges, causing a recalibration in the stablecoin landscape,” analysts led by Nikolaos Panigirtzoglou stated.
This regulatory clarity has strengthened the position of euro-denominated stablecoins like Circle’s EURC while presenting challenges for non-compliant tokens such as Tether’s EURT, the report observed.
Stablecoins, often tied to fiat currencies like the euro or U.S. dollar, are designed to maintain a consistent value and play a pivotal role in digital asset trading and payments.
Under MiCA, stablecoin issuers must adhere to stricter rules, including maintaining substantial reserves in European banks and obtaining specific licenses. These measures prompted Tether to phase out its EURT token, with a planned redemption window extending into 2024.
Several EU exchanges have also delisted Tether’s USDT, further limiting its influence in the region. Despite these challenges, Tether remains dominant globally, particularly in Asia, where regulatory restrictions are less pronounced.
Tether has taken steps to align with MiCA by investing in compliant entities such as Quantoz Payments and European issuer StablR, signaling its intent to remain competitive within the European Union’s evolving digital asset ecosystem.
