Euro stablecoin market surges under MiCA

The European Union’s Markets in Crypto-Assets Regulation (MiCA) framework is gradually coming into effect according to its planned implementation timeline. The initial set of regulations, which took effect on July 1, focused on stablecoins and their issuers.

These clear guidelines have both cleaned out the market of players not able to meet regulatory requirements and created a favorable environment for stablecoins pegged to local currency.

One example is a new partnership between the France-based fintech company Next Generation and Ireland-based electronic money institution (EMI) DECTA Ltd, which announced a plan to reintroduce a euro-pegged stablecoin, EURT, on the Stellar blockchain.

According to the involved parties this initiative, launched on Aug. 5, is fully MiCA compliant.

MiCA Rebirth

Next Generation has strong ties to the renowned fintech player Tempo France. This company initially launched EURT in 2017 in collaboration with the Stellar Foundation, pioneering one of the first euro-pegged stablecoins. 

However, the absence of a regulatory framework then led to the project’s suspension. Though now, under MiCA, it has classified stablecoins as electronic money tokens (EMTs), aligning them with traditional e-money and necessitating that issuers possess an EMI license or be a credit institution.

This regulatory clarity has transformed the euro-backed stablecoin market, making it more predictable and attractive to investors.

At the time of MiCA’s enactment, one industry analyst told Cointelegraph that they anticipate a potential shift toward euro-backed stablecoins as demand picks up in European markets.

Stablecoins on the rise?

DECTA is already authorized by the Central Bank of Ireland as an EMI, which it will utilize to license to issue EURT, ensuring full regulatory compliance.

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Suren Hayriyan, the president of Next Generation, said that the current demand for euro-backed stablecoins is around $30 billion with a supply of less than $300 million. The partnership aims to address this gap, with projections indicating a significant growth trajectory for EURT.

At the moment, the euro-back stablecoin market has major players such as Circle with its (EURC) and Tether’s (EURT), which Hayriyan called their “main competitors.”

“However, our robust regulatory compliance and technological infrastructure position us strongly in this evolving market,” he said. Next Generation and DECTA are targeting a launch of EURT by October 2024.

Circle became the first global stablecoin issuer to comply with MiCA and chose France as its European headquarters, citing the country’s “forward-looking” stance on digital asset regulation.

The activation of MiCA is expected to drive substantial growth in the euro-backed stablecoin sector. Market predictions forecast a minimum market capitalization of 15 euro by 2025, reaching 70 billion euro by 2026 and potentially surpassing 2 trillion euro by 2028.

As of July 31, stablecoin market capitalization of stablecoins was on the rise, with an increase of 2.1% to $164 billion in July. This marked the highest levels since April 2022, and stablecoins such as USD Coin (USDC) saw their trading volume soar by 48%.

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