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As of December 30, 2024, Mika It officially came into effect, marking a turning point in the EU's approach to crypto assets.
Although the euro is important to TradFi – accounting for 20-30% of global forex reserves, SWIFT transactions and trade flows – it represents less than 0.5% of global stablecoin trading.
Patrick Hansen, industry expert and Circle The EU policy leader expects this to change. He emphasized the importance of MiCA as “the world’s most comprehensive regulatory framework for crypto assets.”
“The EU has a unique opportunity to position itself as a global hub for cryptocurrency innovation,” Hansen told Blockworks.
Why is the euro lagging behind stablecoins?
Hansen attributes the variation in the value of the euro compared to the dollar to several factors:
1. Dollar-dominated liquidity: “It has been impossible to catch the network effects that have arisen around US dollar stablecoins. European users interacting with global cryptocurrency markets choose what is cheaper and more liquid.
2. Historical negative interest rates: “For a long time in the Eurozone, negative interest rates have called the stablecoin business model into question.”
3. Regulatory uncertainty: Before MiCA, Euro stablecoins lacked a dedicated regulatory framework, which was a deterrent Institutional players.
MiCA addresses this third point by creating a clear framework for stablecoins. Hansen points out that the entry into force of this agreement has already attracted institutional interest, from major European banks and other players. exploration Or launch Euro stablecoin products. Highlights of Circle's launch of the EURC under MiCA compatible conditions, with reserves being managed entirely by a French-regulated entity, noting that “we have seen 60-70% growth in EURC supply, driven by launches on multiple blockchains.”
MiCA requires stablecoin issuers to hold reserves proportional to the tokens in circulation in the EU. Hansen explained that the department uses a “dynamic rebalancing” model for compliance.
“If we see an increase in the number of USDC held in the EU, we increase European reserves accordingly,” he said.
Emerging use cases for onchain Euro
Hansen sees two main drivers for Euro stablecoin adoption: regulated crypto capital markets and real-world applications for stablecoins.
“Only stablecoins authorized under EU rules will ultimately be used as trading pairs in regulated cryptocurrency markets,” Hansen said. “I wouldn't be surprised to see significant growth in this area.”
This change has pushed cryptocurrency exchanges to... Remove USDT As trading pairs for clients in the European Union.
According to Hansen, enterprise use cases, such as cross-border payments and tokenized financial instruments, are gaining momentum. “Corporate suppliers in the eurozone will inherently require euro-denominated assets to manage risks,” he said.
However, while MiCA offers a solid foundation, Hansen cautions that it is just “version 1.0” and must evolve to meet emerging challenges. He also warns that the EU's Travel Rule (TFR), which requires additional user verification for some transactions, could create friction — especially for self-custodial wallets.
Ultimately, MiCA's success will depend on whether it is able to balance fostering innovation, protecting consumers, and creating a competitive domestic market.
As Hansen puts it, “Only time (and the market) will tell whether Mika is able to achieve his goals.”
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