European Crypto Exchanges Developing Their Own Stablecoins in Response to Regulatory Changes
As the European Union tightens its oversight on third-party stablecoin issuers, crypto exchanges like Kraken and Crypto.com are taking proactive steps to develop their own stablecoins. This move comes in light of the new regulatory framework introduced by the Markets in Crypto-Assets (MiCA) regulation, which became effective in January.
Regulatory Changes Under MiCA
- All stablecoins, classified as “e-money tokens” (EMTs) and “asset-referenced tokens” (ARTs), must now obtain authorization from an EU-based financial regulator.
- Issuers are required to demonstrate transparency in reserves, maintain stable backing with liquid assets, and comply with stringent consumer protection measures.
- Non-compliant stablecoins like Tether’s USDT and PayPal’s PYUSD have already been delisted from most European exchanges.
- The European Securities and Markets Authority (ESMA) has set a final deadline for exchanges to remove unauthorized stablecoins by March 2025.
Kraken and Crypto.com’s Response
Instead of relying on third-party stablecoin providers, Kraken and Crypto.com are developing their own proprietary stablecoins to ensure compliance with MiCA regulations and ensure operational stability within the EU.
Kraken’s Plan
- Kraken is planning to launch a US dollar-backed stablecoin through its Irish subsidiary to maintain its European presence.
Crypto.com’s Strategy
- Crypto.com is also working on its own stablecoin but has not disclosed details about its fiat backing and issuance structure.
- The company has obtained a MiCA license from Malta’s financial regulator, allowing it to operate across all European Economic Area (EEA) member states.
Compliance Challenges and Global Impact
MiCA is expected to influence stablecoin regulations globally, with requirements such as fully backed reserves, clear redemption mechanisms, and caps on large-scale transactions. While some issuers are aligning with the new regulations, others like Tether are still working on obtaining approvals.
Exchanges like KuCoin are also adapting to the new regulatory landscape by applying for MiCA licenses, reflecting a broader industry shift towards compliance and regulatory alignment.
