A substantial drop in euro stablecoin trading volume characterizes the European Union (EU) market in the last three months. Exactly the period since the entry into force of the rules for stable currencies of the Regulation for the Cryptoasset Market (MiCA).
As reflected the statistics From analysis firm Kaiko, the most pronounced effects have occurred in euro stablecoin markets. This is because the weekly trading volumes of these currencies have registered a drop that It is estimated at 70%going from USD 100 million to USD 30 million since the implementation of MiCA.
“This indicates that there has been no significant increase in demand for euro-backed stablecoins despite the regulatory changes,” comment Kaiko analysts. The situation shows that the new regulations, instead of encouraging the use of euro stablecoins (as regulators expected), have caused the opposite.
They observe that the fall occurs despite the growth in market share of euro-related currencies that comply with MiCA. In this sense, the stablecoins EURC of Circle and EURCV of Société Générale stand out, which reached an all-time high of 67%.
These changes in market share are mainly related to the stablecoin exclusions that exchanges began to make, forced by MiCA compliance. As CriptoNoticias reported, since the middle of the year several exchange platforms have been announcing their decision to remove stablecoins that do not comply with regulations from their listsincluding USDT, the most popular on the market.
This is what Binance and Bit2me did, which a few months ago reported restrictions on the use of unregulated stablecoins; while Kraken is still evaluating options. The most recent announcement was made by Coinbase, indicating that it will withdraw USDT and all stablecoins that violate the MiCA Law from Europe.
In this regard, Kaiko points out that the changes currently occurring in the market have been mainly driven by Coinbase’s announcements, which have made this exchange overtake Binance as the leading exchange of stablecoins in euros.
Regarding dollar-backed stablecoins, the report predicts that the exclusion of USDT for European users on Coinbase will likely boost stablecoins that do comply with the Regulation, among which Circle’s USDC stands out.
“Historically, USDT (non-MiCA compatible) has seen rapid global adoption. Listed on Coinbase in 2021, USDT’s share of BTC-USDT volume quickly surpassed BTC-USDC by the end of 2021,” the Kaiko team recalls.
In fact, in the first month after the regulation came into force, an increase in the use of USDT was recorded, an action that was interpreted as part of the process of settlement of transactions with the stable currency by many users, preparing for the new regulation.
But now, in the midst of the transition to MiCA, transactions with USDT are declining and USDC has become the stablecoin backed by dollars largest in the European market. Although its market share grew moderately, from 10% to 12%.
USDT has a chance to grow in Europe’s DeFi
As the Kaiko report points out, it is expected that the use of USDT will disappear from the European Union market in the coming months, taking into account that the transition period for adaptation to MiCA ends in December.
However, the most recent information from Tether points to the launch of a new solution suitable for Europe, which replaces the role of USDT. A measure that is necessary taking into account that a large percentage of European fintechs They depend on stablecoins pegged to the dollar.
In any case, the departure of USDT will be more notable in centralized exchanges (CEX), as analysts predict a substantial increase in the use of the Tether dollar stablecoin on decentralized exchanges (DEX).
Since DEXs are not regulated by the new rules, they allow trading of USDT, which could attract traders seeking liquidity as USDT remains by far the most liquid stablecoin on the market.
Kaiko Report.
In this way, an additional boost to the growing use of USDT in decentralized finance (DeFi). A trend that, according to Kaiko, has become evident in times of crisis.
We still have to wait to see how the market will behave. The changes will be more evident from January 1, 2025, when the MiCA regulation come into full force. The coming months will be revealing for the future of stablecoins in Europe.
