# Tether Invests Significantly in Maltese Stablecoin Issuer to Navigate EU’s MiCA Regulations

Tether, the world’s largest stablecoin issuer, has made a notable investment in ‘StablR,’ a small stablecoin issuer based in Malta, in response to the European Union’s upcoming crypto regulations under the Markets in Crypto-Assets (MiCA) framework. Tether has decided to halt the issuance of its euro-pegged stablecoin and switch to a strategy of collaborating with compliant firms. This move is aimed at adapting to a new environment where regulation and innovation intersect following the implementation of MiCA.

# What is MiCA?

MiCA stands for Markets in Crypto-Assets, a comprehensive regulatory framework for cryptocurrencies and related services. Previously unregulated under traditional financial regulations, the cryptocurrency market is now a core focus of the EU’s digital finance strategy. MiCA’s origins date back to 2018, when the European Commission recognized the need for a unified regulatory approach to address the new challenges posed by the rapidly growing cryptocurrency market. Officially proposed on September 24, 2020, MiCA is part of the EU’s broader efforts to enhance digital finance and protect consumers.

# Assets Covered by MiCA

MiCA categorizes crypto assets into three types: Asset-Referenced Tokens (ART), Electronic Money Tokens (EMT), and other cryptocurrencies. EMTs are tokens backed by fiat currencies like the euro or the dollar, while ARTs are digital tokens collateralized by various assets. Both token types aim to maintain stable value but differ significantly in design and regulatory requirements.

### Asset-Referenced Tokens (ARTs)
ARTs are designed to maintain a stable value and are collateralized by assets like fiat currencies, commodities, or other cryptocurrencies. Examples include USDe and synthetic asset-backed stablecoins.

### Electronic Money Tokens (EMTs)
EMTs are directly pegged to official fiat currencies such as the euro or the dollar. They serve a similar purpose to digital currencies and provide stable value for everyday payments and transactions. Examples include USDC and USDT. Other cryptocurrencies are classified under the ‘others’ category.

### Exclusions
Non-Fungible Tokens (NFTs) and decentralized applications (dApps) are excluded from MiCA regulation. However, NFTs may fall under MiCA if they function similarly to utility tokens or are issued in large quantities.

# MiCA Regulatory Scope and Obligations

MiCA primarily targets Crypto-Asset Service Providers (CASPs), including wallet services, cryptocurrency exchanges, token issuers, and crypto investment advisory firms. These entities must establish offices within the EU and appoint at least one EU resident as a director. They are required to implement Anti-Money Laundering (AML) and Know-Your-Customer (KYC) procedures, maintain transparent risk disclosures, and establish clear fee structures. CASPs serving over 15 million users annually within the EU are classified as ‘significant CASPs’ (sCASPs) and face even stricter regulations.

# Impact on Stablecoin Issuers

Oversight of the cryptocurrency market is managed by the European Securities and Markets Authority (ESMA), while the European Banking Authority (EBA) handles financial stability issues related to stablecoin issuance. EU member states designate regulatory agencies to enforce MiCA at the national level, adjusting regulations as needed for local contexts.

MiCA’s implementation is occurring in phases. Regulations on EMTs and ARTs took effect in June 2024, with the Transfer of Funds Regulation (TFR) coming into force on December 30. A significant change is that CASPs must be certified to operate within the EU, meeting security, governance, and compliance requirements.

# Industry Challenges and Controversies

Industry players find it challenging to keep pace with the regulatory changes, particularly the stringent requirements for stablecoin issuers. MiCA imposes strict asset-holding requirements and reporting obligations. Foreign currency-backed stablecoins like USDT and USDC must suspend issuance and report if their daily transaction volume exceeds specific limits (1 million transactions per day, 200 million euros). In contrast, euro-based stablecoins face no such restrictions.

Due to enhanced reporting requirements, Tether recently ceased the issuance of its own euro-pegged stablecoin and adopted a strategy of investing in smaller issuers like Quantoz and StablR, which have EU approval. Paolo Ardoino, CEO of Tether, remarked, “The evolution of the regulatory environment is a positive signal but also entails systemic risks that could exacerbate the vulnerabilities of the European banking sector.”

# Reshaping the European Stablecoin Market

Since MiCA’s initial implementation in June, the European stablecoin market has been undergoing restructuring. Tether and several exchanges have delisted stablecoins or adjusted their services. In contrast, Circle, which issues USDC and EURC, has expanded EURC issuance after obtaining an EMI license from French regulators, now holding a 67% market share of MiCA-compliant stablecoins. Coinbase has also delisted Tether (USDT) and increased euro-based stablecoin trading, emerging as a leading platform.

# Growth Prospects Compared to the Global Market

According to Kaiko Research, the current stablecoin market is valued at approximately $200 billion, with dollar-pegged stablecoins accounting for 99%. Euro-based stablecoins remain relatively small at around $400 million. Nonetheless, there is optimism that MiCA regulations will contribute to a stable market. Tether’s investment in StablR is seen as a strategic move to capitalize on this potential growth. Kaiko Research stated, “MiCA’s unified approach to crypto regulations within the EU is expected to simplify complex licensing procedures, enhance investor protection, and stabilize the market. MiCA could potentially set the standard for global cryptocurrency regulation.”

By strategically aligning with compliant issuers and adapting to new regulatory landscapes, Tether aims to lead in a rapidly evolving market, contributing to the broader acceptance and growth of stablecoins in Europe and beyond.