Circle vs. the Rest: Navigating MiCA’s Effect on USD Stablecoins and Market Competition – Interview with Stablr CEO

• As Europe prepares to implement the Markets in Crypto-Assets Regulation (MiCA) by the end of 2024, the landscape for US-denominated stablecoins is poised for a significant transformation.
• In an exclusive interview, Gijs op de Weegh, CEO and Founder of Stablr, provides a detailed analysis of how these regulations will reshape the market dynamics for USD-backed stablecoins in Europe.

With MiCA’s stringent rules banning unregulated stablecoins and imposing trading restrictions on their regulated counterparts, the liquidity of USD stablecoins is expected to diminish, potentially paving the way for EU-regulated EUR and USD stablecoins to capture a larger market share. Gijs discusses the impact of these regulations on major players like Circle and how smaller firms, such as Stablr, are strategizing to navigate the evolving regulatory landscape.

• Collin Brown: Can you explain what the MiCA regulations mean for US-denominated stablecoins operating in Europe?

Gijs op de Weegh: The market for crypto assets is predominantly priced in US dollars, making the use of USD stablecoins common and ensuring high liquidity. With the implementation of the MiCAR rules, unregulated stablecoins will be banned from the European market. These regulations are clearly defined, with a deadline set for the end of 2024. Regulated USD stablecoins will face trading restrictions in terms of both the number of transactions and volume. Consequently, the liquidity of existing USD stablecoins will decrease, allowing EU-regulated EUR and USD stablecoins to gain market share. Due to these restrictions, we can expect various stablecoins to increase their presence in the EU market.

• Collin Brown: How does Circle’s established status in the crypto industry influence the competitive landscape for smaller firms like StablR in the EU?

Gijs op de Weegh: Our business model is built on partnerships, and while we are developing our network, Circle is doing the same. In my opinion, Circle’s presence as a regulated stablecoin issuer in the EU market is a significant growth driver. It plays a crucial role in creating the adoption of stablecoins within Europe.

• Collin Brown: What significant adjustments have companies like Circle had to make to their business models to comply with MiCA regulations in Europe?

Gijs op de Weegh: This is a fascinating topic. To issue fungible stablecoins, I am sure Circle had to make significant arrangements regarding regulatory capital; because how can two different assets with different characteristics be fungible otherwise? So either both have the same conditions or they are not fungible.

• Collin Brown: How do these regulations affect the fungibility of USD-backed stablecoins, and do you see any workarounds for other issuers like Tether?

Gijs op de Weegh: If there are differing regulatory capital requirements between stablecoins issued in Europe and those from other jurisdictions, it creates an arbitrage opportunity. This could allow issuers like Tether to issue both USDT and a European-issued USDT without adhering to the stringent regulatory capital demands for most of their business. For MiCAR to be effective, the requirements need to be clear, ensuring a level playing field for all issuers.

• Collin Brown: What potential knock-on effects could MiCA regulations have on U.S. stablecoin issuers?

Gijs op de Weegh: I believe MiCAR is being closely monitored by regulators worldwide. If MiCAR is introduced smoothly and effectively, it could set a precedent that other countries might follow. MiCAR has the potential to become a blueprint for the global crypto industry.

• Collin Brown: How might centralized exchanges offering USD-denominated stablecoins in the EU be impacted?

Gijs op de Weegh: Exchanges will likely offer both MiCAR-compliant USD and EUR stablecoins to their European clients to maintain business and keep all options available. Over time, it is expected that many venues will gradually shift a significant portion of their volume from USD to EUR stablecoins.

• Collin Brown: What are the broader implications for the global competitive landscape of stablecoins?

Gijs op de Weegh: The regulatory status of European stablecoins opens up numerous new business opportunities, similar to the introduction of Bitcoin ETFs. With this regulatory clarity, more institutions and asset managers will feel comfortable exploring and using stablecoins, providing a significant boost to the overall stablecoin ecosystem.

• Collin Brown: Where do you foresee the next major changes in the European crypto market coming from?

Gijs op de Weegh: The next major changes in the European crypto market will likely come from MiCAR licenses for exchanges. Starting next year, exchanges will not be limited to local markets but will be able to operate on a pan-European scale.

• Collin Brown: How do you anticipate the UK and US markets will respond to these regulatory changes in Europe?

Gijs op de Weegh: This is more of a political question than a regulatory one at the moment. However, if there is political appetite for crypto in the UK and the US, MiCAR will likely be closely followed and could influence future regulations in these markets.

• Collin Brown: In the long term, how much traction do you expect EUR-backed stablecoins to gain?

Gijs op de Weegh: We literally just started two weeks ago, and while the market is still taking shape, we are already seeing significant movement and action. In the short term, opportunities primarily lie within the crypto space. However, in the long run, the banking and payment sectors are expected to surpass crypto in the stablecoin market. More products and Layer 2 solutions will cater to stablecoins, with use cases in traditional finance gradually gaining adoption over the years. We are still at the beginning of this journey.

Collin Brown: Thank you very much for your detailed analysis. We’re excited to see how Stablr and stablecoins will shape the future of payments. Talk to you again soon!