Binance to restrict unauthorised Stablecoins in response to MiCA

Binance is introducing an array of changes in response to the European Economic Area’s (EEA) upcoming Markets in Crypto Assets (MiCA) regulations. Stablecoins, a core issue when it comes to MiCA, will be affected the most on the exchange.

Starting July 30, the crypto behemoth will start categorising stablecoins as either “Regulated” or “Unauthorized.” As such, unauthorised stablecoins will be subject to phased restrictions.

The announcement stated: 

“These transitional measures aim at allowing EEA users to switch to Regulated Stablecoins while avoiding any market disruption and complying with MiCA stablecoin rules”

Stablecoin market to take a hit

MiCA is perhaps the biggest regulatory shift in the cryptocurrency industry this year. 

Regulators are looking to establish a unified regulatory approach across the European Union, with this landmark package. It mandates stringent transparency measures, capital sufficiency, and operational standards for crypto asset service providers (CASPs).

Set to come into force on June 30, the regulations restrict stablecoins from unlicensed issuers. As such, all crypto-focused platforms like Binance are only allowed to offer assets greenlighted by regulators.

This change directly impacts the ‘convert’ function on Binance.

Binance will only allow selling these assets for other digital currencies, regulated stablecoins, or fiat. This would also be dependent on jurisdictional availability.

Perhaps the biggest change will be the removal of unauthorized stablecoins from the platform. 

Stablecoin pairs constitute a big chunk of Binance’s trading volume across the region.  

Under MiCA, stablecoin issuers are mandated to maintain sufficient capital reserves. An issuer must hold a minimum of €350,000 or 2% of their total reserve assets at all times.

For those with a market cap of at least €1 billion or 500,000 in daily transaction volume, the requirement is amped up to 3%.

Stablecoins such as USDT (Tether) and USDC (USD Coin), which are pegged to the US dollar, are among those likely to be impacted under these mandates.

Meanwhile, algorithmic stablecoins like terraUSD (UST) are completely banned under MiCA. A direct response to the collapse of UST.

Other affected offerings

Nevertheless, Binance customers would still be able to hold and transfer these assets via the exchange’s wallets. 

Further, Spot Copy Trading for unauthorized stablecoins will sunset on June 29, 2024. All other offerings will remain active without the involvement of unauthorised stablecoins. 

This is except for the FDUSD pool, which will be permanently inaccessible to customers in the area. 

Binance OTC will also drop purchases for these assets. Only peer-to-peer selling of these restricted stablecoins will be allowed on the platform.

Despite the notable impact on the crypto economy, especially in the EEA, MiCA has been hailed as a welcome change.

According to Ignacio Palomera, CEO of web3 talent network Bondex, the regulations will bolster the crypto economy. Speaking to Invezz, Palomera said:

“This regulatory certainty will attract more capital to the EU, boosting investment in the digital assets sector. As more capital flows in, we can expect a surge in job creation, especially in the Web3 space.”

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