- Uphold has announced it will no longer support six stablecoins for European users starting July 1 to comply with EU’s MiCA regulations
- The affected stablecoins, including Tether (USDT) and Dai (DAI), will be converted to USD Coin (USDC) after July 1
- Other major cryptocurrency exchanges have taken similar steps to remain compliant with MiCA regulations in Europe
In a significant move to comply with the European Union’s Markets in Crypto-Assets Regulation (MiCA), cryptocurrency exchange Uphold has announced it will no longer support six stablecoins for its European users starting July 1. The affected stablecoins, including Tether (USDT) and Dai (DAI), will be converted to USD Coin (USDC) after this date, after which deposits will not be accepted. Uphold is not the only exchange to be affected, with other major platforms taking similar steps in order to remain compliant in Europe.
USDT and DAI the Biggest Casualties
Alongside USDT and DAI, the other stablecoins chosen to be delisted are Frax Protocol (FRAX), Gemini dollar (GUSD), Pax dollar (USDP), and TrueUSD (TUSD). The MiCA framework mandates that fiat-backed stablecoins must maintain a 1:1 ratio of liquid reserves and that issuers create and hold reserves of assets in custody by a third party, separate from other assets. Clearly, Uphold has concerns over the backing of these stablecoins, with only USDC having the requisite level of confirmed backing.
Algorithmic stablecoins are entirely prohibited under these regulations following the collapse of Terraform Labs’ UST stablecoin in 2022. These measures aim to bolster consumer confidence in digital currencies by ensuring that stablecoins can reliably function as a store of value and a medium of payment.
MiCA Making Its Presence Felt
The MiCA legislation, which was passed into law in May 2023, partially came into effect in June 2023, with full enforcement anticipated by the end of 2024. The new regulations, particularly those concerning stablecoins, are set to be implemented in the European Economic Area from June 30, 2024.
These laws impose stricter requirements on fiat-backed stablecoins and e-money tokens, placing them under the supervision of the European Banking Authority instead of national regulators within EU member states.
Under MiCA, stablecoin issuers in the EU must obtain licenses as credit institutions or Electronic Money Institutions. While these regulations present challenges for some stablecoins, those backed by the euro might find a conducive environment for growth.
Uphold Not Alone
Uphold’s decision is part of a broader trend among cryptocurrency exchanges to adapt to MiCA. For instance, Binance reclassified its stablecoins into “regulated” and “unauthorized” categories earlier in June, though it has not yet finalized which stablecoins fall into these categories. In March, OKX delisted Tether in Europe without explicitly citing MiCA, while Kraken is currently evaluating its support for USDT in the region.
These regulatory adjustments by major exchanges highlight the evolving landscape of the crypto market in response to MiCA, reflecting a significant shift towards tighter oversight and increased consumer protection in the European Union.
