Coinbase plans to delist Tether (USDT) and other stablecoins that do not comply with European Union regulations. The decision to delist stablecoins is in accordance with the EU’s MiCA (Markets in Cryptoassets) regulation, which sets out market rules for digital assets that are currently not covered by existing legislation.
According to Bloomberg, Coinbase has announced that it will delist some stablecoins from its platform by the end of 2024, including USDT, Tether’s USD-pegged stablecoin. The decision by the giant crypto exchange follows increased regulation by the European Union’s MiCA (Markets in Cryptocurrency) Regulation, which provides guidelines for crypto assets not already covered by current EU law.
Coinbase to delist unclaimed stablecoin on December 30th
Coinbase says it will “restrict services” for stablecoins that do not meet MiCA requirements by December 30, 2024, for customers in the European Economic Area (EEA). These EEA member states include Germany, France, Spain, Ireland, Italy, Greece, Poland and many others, for a total of 30 countries, according to the UK government’s website.
“In November, we plan to share more details about our migration plans to assist our EEA customers,” Coinbase said. “This includes the option to switch to stablecoins that have achieved compliance under MiCA, such as USDC or EURC.”
MiCA’s rules cover crypto asset service providers (CASPS), including exchanges, custodial wallets, cryptocurrency trading and advisory firms.
In addition, others such as e-money tokens (stablecoins backed by one fiat currency), asset reference tokens (stablecoins backed by a commodity or backed by one or more currencies), utility tokens, etc. It consists of three asset classes, including the following tokens:
The MiCA regulatory regime provides a uniform authorization and licensing framework for CASPS operating within the EU. Digital asset service providers approved in either country would then no longer need separate approval to operate in the broader European Union market.
Algorithmic stablecoins banned, strict rules for other coins
MiCA bans algorithmic stablecoins in the EU. Algorithmic stablecoins, such as the collapsed TerraUSD associated with the defunct cryptocurrency exchange FTX, rely on software programs that adjust supply to control asset price fluctuations.
Algorithmic stablecoins have some significant risks, including a high likelihood of collapse if they cannot meet a certain level of demand required for the system to function properly.
Stablecoins that rely on these programs are also at risk of large amounts of liquidity being withdrawn from the underlying assets by investors, especially based on widespread speculation or other adverse news or market conditions.
MiCA will also apply stricter requirements to fiat-backed stablecoins, such as requiring them to be backed 1:1 by reserves that can be easily converted into cash. Fortunately, Tether’s USDT meets this requirement perfectly, being pegged 1:1 to fiat currencies and backed by Tether’s reserves.
However, it is clear that Tether does not meet certain other conditions regarding stablecoin issuers in the region for Coinbase to discontinue offering USDT to EEA customers.
MiCA was introduced into the EU in June 2023. However, the latest version of the law will come into full force on December 30th and will provide guidelines for all aspects of crypto asset management in the region.
