MiCA regulation for stable coin

The Markets in Crypto-Assets (MiCA) Regulation of the European Union establishes a legal framework for the regulation of stablecoins, including their issuance, circulation and use. This regulation was adopted to create a transparent and sustainable environment for the development of crypto-assets, ensure consumer protection and minimise risks to the financial system.

Stable coins are a type of cryptoasset whose value is linked to certain underlying assets such as fiat currencies, commodities or baskets of assets. They provide price stability, which makes them popular for use in settlement, store of value, and investment.

MiCA introduces the following key provisions for the regulation of stable coins:

1. Classification of stable coins: MiCA distinguishes between two types of stable coins:
   • Asset-Referenced Tokens (ART): backed by a basket of assets or commodities.
   • Electronic Money Tokens (EMT): linked to the value of a fiat currency such as the euro or dollar.
2. Issuer Licensing: Issuers are required to obtain the appropriate licence from the national regulator to issue stable coins. This requires providing detailed information on collateral arrangements, business model and risk management measures.
3. Reserve collateral: Issuers of stable coins are required to maintain full reserve collateral. Reserves must be placed in highly liquid and safe assets, such as government bonds or bank deposits. This ensures the issuer’s ability to repay obligations to token holders at any time.
4. Transparency and disclosure: Issuers are required to regularly publish information on reserve structures, audits and any changes to collateral arrangements. This allows users to have confidence in the reliability of the token.
5. Consumer protection: The Regulation provides for the creation of compensation mechanisms for token holders in the event of issuer default or loss of liquidity. This includes the right to redeem tokens at their face value.
6. Countering systemic risks: Large issuers of stable coins whose activities may affect financial stability are subject to stricter regulatory oversight. This includes additional capital, reporting and risk management requirements.
7. Payment system integration: EMTs can be used to make payments within the traditional financial system, which requires issuers to comply with standards applicable to payment service providers.

The application of MiCA contributes to building confidence in stable coins as a financial instrument. On the one hand, the regulation creates conditions for their safe use, on the other hand, it prevents possible abuses and risks for users and the economy as a whole.

MiCA implementation also promotes innovation in digital finance. Common rules at the European Union level open up opportunities for issuers of stable coins to scale their businesses and integrate them with other financial products. However, MiCA compliance requires significant efforts on the part of issuers, including investment in technology, risk management and compliance with regulatory standards.

MiCA sets a new era for stable coins by ensuring their stability, security and integration into the financial ecosystem. This creates the basis for further growth of the digital economy and increasing its sustainability.

 What is stable coin?

Stable coins (stablecoins) are a type of cryptoasset that provide stability of value by being linked to underlying assets such as fiat currencies, precious metals, commodities or baskets of assets. The main goal of stablecoins is to eliminate the volatility that characterises many cryptocurrencies and offer users a reliable tool for settlement, value storage and investment.

Stable coins can be divided into three main categories:

1. Fiat-backed stable coins: Linked to one or more fiat currencies, such as the US dollar or the euro. Reserves for such coins are held in bank accounts or other liquid assets, ensuring that they can be redeemed at a fixed price.
2. Commodity-backed stable coins: Backed by reserves of commodities such as gold or oil. This allows users to invest in assets by storing them in digital form.
3. Algorithmic stable coins: Their stability is maintained through algorithms and smart contracts that regulate supply and demand for the token, instead of reserving assets.

Key benefits of stable coins include:

• Stability: Being tied to the underlying assets eliminates the sharp fluctuations in value common to traditional cryptocurrencies.
• Broad applicability: Stable coins are used in international payments, e-commerce, and as a store of value.
• Technological innovation: Through integration with blockchain technology, they provide transparency, security and transaction efficiency.

However, the use of stable coins also involves a number of risks, including dependence on issuer reliability, regulatory uncertainties, and potential threats to financial stability if mass adoption occurs.

In the European Union, activities related to stable coins are regulated under the Markets in Cryptoassets Regulation (MiCA). MiCA establishes strict rules for issuers of stable coins, including requirements for backing, licensing and transparency. This protects users and minimises risks to the financial system.

Issuers of stable coins are required to maintain full reserve coverage, regularly publish information about their reserves and ensure the right of users to redeem tokens at face value. In addition, large issuers whose activities may have a significant impact on the financial system are subject to stricter supervision.

Stable coins play an important role in the development of the digital economy by combining the advantages of traditional financial instruments and innovative technologies. They help accelerate international payments, reduce costs and expand access to financial services. At the same time, their successful development depends on compliance with regulatory requirements, increasing user trust and integration with existing financial infrastructure.

Stable coins are thus a key element of today’s digital economy, providing a reliable and versatile tool for businesses and private users.

USDT MiCA regulation

With the implementation of MiCA Regulation (Markets in Crypto-Assets Regulation), the European Union has established a legal framework to regulate cryptocurrencies, including stablecoins such as USDT. These changes aim to ensure transparency, user protection and risk management. Regulated United Europe (RUE) provides comprehensive support to companies working with USDT and other stable coins, helping them adapt to the new standards and successfully launch projects in the EU.

USDT, being one of the most popular stablecoins backed by fiat currency, falls under the category of e-money tokens under MiCA. For USDT issuers, this means the need to meet strict reserve, transparency and user protection requirements. MiCA requires issuers to maintain sufficient fiat currency reserves, provide regular reports on their assets and protect the interests of token holders.

One of the main challenges for USDT companies is choosing the right jurisdiction for registration. Germany and France provide a developed legal framework for licensing e-money tokens, while the Czech Republic and Estonia offer simplified registration procedures and favourable tax conditions. However, differences in adaptation periods and requirements between EU member states make the strategic choice of jurisdiction critical.

RUE helps USDT issuers determine the best jurisdiction to operate in. We conduct due diligence and business model analysis to offer the most favourable solution. Our team develops a MiCA compliance strategy, including preparation of whitepaper, risk reports and internal documentation. We also support the licensing process, ensuring full MiCA compliance.

USDT issuers and other stablecoin companies are also required to comply with the GDPR if their activities involve the processing of personal data. This includes appointing a DPO, conducting DPIAs and implementing robust data protection systems. RUE provides a full range of services to ensure GDPR compliance, minimising risk and increasing user confidence.

Examples of successful adaptation include projects that have registered in countries with favourable conditions for crypto projects, such as Malta or Estonia. These companies have implemented reserve management mechanisms and developed transparent reporting processes, allowing them to attract institutional investors and strengthen their market position.

By partnering with Regulated United Europe, USDT companies gain access to expert support and customised solutions. We offer long-term assistance, including monitoring regulatory changes, employee training and advice on how to engage with regulators. Our goal is to help your project successfully adapt to the new regulation and ensure its sustainability within the European Union.

Stablecoins under MiCA: Regulatory Peculiarities

MiCA Regulation (Markets in Crypto-Assets Regulation) sets out clear rules for stablecoins, including e-money tokens and asset-referenced tokens, which play a key role in the cryptoasset ecosystem. These types of tokens are characterised by their attachment to specific assets and provide users with stability of value. However, new regulatory requirements are significantly changing the approach to their issuance and use.

For e-money tokens, MiCA sets requirements similar to those for traditional electronic money. Issuers are required to ensure that the token is fully linked to fiat currency, maintain liquid reserves equivalent to the face value of tokens issued, and provide holders with the right to redeem tokens at any time. This creates a more rigorous framework for e-money token-related transactions and increases trust on the part of users and investors.

Asset-referenced tokens have a wider range of collateral, which may include a basket of assets such as fiat currencies, commodities or other crypto-assets. MiCA requires issuers of such tokens to maintain robust and transparent provisioning mechanisms to ensure their stability. Issuers are required to publish regular reserve reports, engage external auditors for verification and develop risk management mechanisms.

Collateralisation and reservation requirements are central to MiCA’s regulatory policy. For both types of tokenisation is provided for:

1. Maintaining sufficient reserves. Reserves should be liquid and equivalent to the total value of tokens issued. This reduces risks for users and strengthens the stability of tokens.
2. Regular reporting. Issuers are required to provide detailed reports on the composition and status of reserves and disclose information on potential risks.
3. Risk management measures. The development and implementation of operational, financial and market risk management systems are becoming mandatory for all issuers.

Potential implications for issuers include the need for significant investment in MiCA compliance. This may include increased costs of maintaining reserves, engaging specialised legal and audit services, and reviewing business models. However, compliance offers new opportunities for growth, including access to a wider range of institutional investors and users who value stability and transparency.

MiCA also strengthens confidence in stablecoins by encouraging their wider acceptance as a means of payment and as a store of value. Issuers that successfully adapt to the new requirements will be able to strengthen their market position and attract additional investment.

Our co-operation with Regulated United Europe (RUE) enables stablecoin issuers to effectively deal with the challenges associated with MiCA implementation. We provide a full range of services, including selection of the optimal jurisdiction, development of reservation policies, preparation of documentation and liaising with regulators. Our goal is to help your project succeed in the new regulatory environment and ensure sustainable development within the European Union.

 How can Regulated United Europe help with MiCA regulation for stable coin?

With the introduction of MiCA Regulation (Markets in Crypto-Assets Regulation), the European Union has set clear standards for the regulation of stablecoins, ensuring their stability, transparency and user protection. However, it also imposes serious obligations on issuers of such tokens, including compliance with reserve, transparency and risk management requirements. Regulated United Europe (RUE) provides comprehensive support to stablecoins projects, helping them adapt to the new regulatory standards and successfully launch projects in the European Union.

Stablecoins backed by fiat currency or other assets play a key role in the cryptoasset ecosystem, providing users with a tool to minimise volatility. MiCA regulates two types of stablecoins: e-money tokens linked to a single fiat currency and asset-referenced tokens backed by a basket of assets. Each of these types is subject to strict requirements, including providing regular reporting, ensuring robust reserves and implementing user protection mechanisms.

One of the key challenges for issuers of stablecoins is the choice of jurisdiction for registration and licensing. Germany and France offer well-developed regulatory infrastructures, which simplifies the MiCA compliance process. At the same time, countries such as the Czech Republic and Estonia provide simplified licensing procedures and crypto-friendly conditions, making them attractive to startups. Differences in national approaches require detailed analysis and a strategic approach to choosing a project location.

RUE helps its clients to choose the most suitable country to register their stablecoin project by conducting a detailed analysis of their business model and company goals. We support our clients at all stages of project implementation, from preparing the necessary documentation, including whitepaper and risk reports, to liaising with national regulators.

stablecoins projects are also required to comply with the GDPR if their activities involve the processing of personal data. This includes appointing a DPO (Data Protection Officer), conducting a DPIA (Data Protection Impact Assessment) and implementing risk minimisation procedures. RUE provides support with these processes, ensuring that your project is compliant with both MiCA and GDPR.

Examples of successful adaptation include companies that have incorporated in countries with favourable conditions for crypto projects, such as Estonia. These projects have implemented robust reserve management mechanisms and regular reporting, allowing them to not only meet the new standards but also attract significant investment.

By working with Regulated United Europe, issuers of stablecoins gain access to unique expertise and tailored solutions to help minimise regulatory risks and take advantage of new regulation. We offer long-term support, including monitoring regulatory changes, staff training and advice on how to engage with regulators. Our goal is to help your project succeed and ensure sustainability in the new European Union regulatory environment.