Circle is qualified to issue USDC and EURC in compliance with the MiCA Act. What does it mean for the crypto industry?

Written by: Aiying Aiying Circle announced that its USDC and EURC stablecoins have complied with the EU’s new stablecoin regulations, becoming the first global stablecoin issuer to be compliant under MiCA regulations. Starting July 1, Circle officially launched these two stablecoins to European customers. This is an important milestone in the development of the Internet financial system, which means that one of the world's largest economies has established clear regulations to make stablecoins legal electronic currencies, pushing the cryptocurrency market into a new stage of mainstream payment, financial and commercial infrastructure. . Prior to this, Aiying wrote an article "Research Report on the European MiCA Bill: A Comprehensive Interpretation of the Profound Impact on the Web3 Industry, DeFi, Stablecoins and ICO Projects", which gave a profound analysis of the impact the bill will have on the industry. Especially the stablecoin market. MiCA requires that stablecoins backed by legal currency must have sufficient liquidity reserves and obtain an "Electronic Money License (EMI)." Additionally, trading volume caps and other asset support requirements for stablecoins are stipulated. June 30 is an important node, requiring exchanges to remove stablecoins that do not comply with regulations. Circle’s USDC is expected to take market share from larger rival Tether Holdings Ltd.’s USDT. OKX, bianace, Bitstamp, and Kraken have all taken steps to change their trading support for USDT in the EU recently this year, removing the ability to use the stablecoin to buy or sell other cryptoassets. Circle's opportunity this time is historically similar to the rise of USDT. Aiying's yesterday article "[10,000-word long article research report] Stablecoin track: models, operating principles, trends and thoughts on Hong Kong stablecoins" mentioned that USDT is the largest The advantage is first-mover advantage, but its rise is mainly due to the support of exchanges and the explosion of the market. At the beginning of the barbaric era of cryptocurrency, from the early Bitcoin blockchain to the later Ethereum ecosystem, USDT was a well-deserved forerunner, and it also predicted the market explosion. If we look back at its currency holding address and market value, although in 2014 It was established in 2017, but its real rise was in 2017. In addition to the bull market, USDT began a super issuance and was criticized by the market for manipulating the price of Bitcoin. But in hindsight, this is an inversion of cause and effect. What is easily overlooked is that China closed down virtual currency trading that year, and more importantly, USDT was simultaneously launched on the top three exchanges that year. Also for now, according to data from Chainalysis's "2023 Cryptocurrency Geography Report", the region accounted for 17.6% of global transaction volume between July 2022 and June 2023. This share has helped Cricle cleaned the house and let him gallop around here.

And Circle is almost certain to benefit from the growth and adoption of Euro digital currencies, known as Euro stablecoins. The MICA Act sets out clear rules for the issuance and operation of euro digital currencies, enabling banks and electronic money institutions to use euro stablecoins as a core part of their products and services. This means that the entire European regulated financial sector can now adopt this network, significantly expanding the use of stablecoins in business and finance. This market is very huge from Aiying's perspective.

Circle’s global compliance vision and starting point have made it what it is today

Veterans in the currency circle know that USDC emerged during the USDT crisis, and its transparent, regulated, and more liquid asset reserves won the favor of customers. If we look back at the rise of USDC, the large increase in its currency holding addresses usually corresponds to the decline of USDT currency holdings, which is usually when USDT has a risk event, especially since it was the only stablecoin trading pair of the compliant exchange Coinbase in its early days. This This kind of regulated blessing brought great benefits to the early USDC market expansion, and was also its main competitiveness in impacting USDT's first position. Due to compliance, DeFi protocols prefer USDC. Liquidity mining allows USDC to rapidly increase in volume and become more dominant on the chain. After Maker introduced the regulated stablecoin USDC in 2020, USDC has become the first choice of major DeFi protocols. Currently, the three major DeFi protocols of MakerDAO, Compound and Aave are the main supporters of USDC. In addition to the benefits of regulation, More importantly, as a collateral for DeFi protocols, USDC has lower volatility than USDT. The starting point advantages of USDC can be summarized as compliance advantages.

What work has Circle done on global compliance?

Circle is registered as a money services business agency of the Financial Crimes Enforcement Network under the U.S. Department of the Treasury. It also operates in accordance with state laws on money transmission businesses and is overall regulated as a form of advance payment. Compared with USDT, the reserve assets of USDC are independent. If Circle goes bankrupt, these reserve assets will be protected according to New York banking laws and federal bankruptcy laws.

Circle Company is the first crypto company to obtain an electronic money transmission license in the United States, the first company to obtain a New York BitLicense, and an electronic money issuance license in the United Kingdom. If you want to have an in-depth understanding of the legal framework of U.S. payments, you can read: [[Payment] An in-depth analysis of the legal basis and requirements for U.S. cryptocurrency payment licenses]

Two years ago, the EU reached the MiCA system, which was finally approved by the European Parliament, becoming the world’s most comprehensive stablecoin and digital asset market regulations. Circle subsequently announced the launch of a euro stablecoin and is fully committed to making it compliant with new EU regulations. France has been at the forefront of establishing crypto and digital asset regulation, and Circle’s choice of France for its European headquarters proves the decision was a wise one. The company works closely with the French financial regulator ACPR to bring the business into compliance with MiCA regulations.

Circle Corporation has now received ACPR’s electronic currency issuance license and has become a MiCA-compliant issuer of USDC and EURC stablecoins. European clients now have direct access to USDC and EURC through Circle Mint France.

As a result, USDC has successfully become the only major global stablecoin that complies with the new European stablecoin regulatory system. Circle has worked closely with regulatory agencies in France, the EU and the United States to achieve full fungibility of global stablecoins on the blockchain network, maintaining technological innovation while complying with strict regulatory standards.

Currently, all USDC and EURC circulating in Europe comply with MiCA regulations. All EURC reserves held by Circle companies are managed under the supervision of French regulatory agencies, and USDC reserves held in Europe are managed by global systemically important banks. Managed within the EU. USDC held by European users remains fully fungible globally and can be traded, transferred, self-custodyed, used in DeFi, etc. without any changes. For details, please see Aiying Ai Ying’s previous article [S&P] USDC stable currency stability assessment and its reserve fund operation method.

In addition, we know that USDC is not exchanged directly with individuals. For USDT above $100,000, you only need to pay the registration fee to exchange directly with Tether, but Circle operates on a customer tier basis. Only its partners or Class A users (exchanges, financial institutions), etc. are eligible to exchange with Circle. Individual ordinary users (Category B) need to expand through third-party channels (such as Coinbase). From now on, Circle will directly issue and redeem USDC and EURC through Circle Mint France with major institutions in the European market, including exchanges, market makers, brokerage companies, consumer wallets, financial technology companies, payment institutions, banks and large enterprise. This marketing system greatly reduces the risk of money laundering for users, and effectively manages and isolates risks through the big B-side.

Summary

The launch of the MICA bill heralds a major shift in the market structure. It is expected that within the next year, major global jurisdictions (including Japan, the United States, the United Kingdom, Singapore, Hong Kong, the United Arab Emirates, Brazil, etc.) will launch comprehensive stablecoins rules, all of which require strict regulatory compliance. The gray market space in the barbaric era has also been continuously compressed, and finally integrated with the compliance regulatory market. We are all witnesses of this change in the financial era. Aiying will continue to share this integration process with you.

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