From 2024, new rules will apply in the European Union to better regulate crypto assets. This will limit the market share of non-euro-pegged stablecoins from that year.
Restriction for non-euro stablecoins
Last Wednesday, ambassadors from 27 EU states approved a new deal in the upcoming ‘Crypto Assets Regulation’ law. To become law, parliament must vote on the rules, something expected to happen in December this year or early next.
Among other things, the deal states that stablecoins not pegged to the euro will be limited to transactions of €1 million and a transaction value of €200 million when placed on the market in the eurozone.
This would mean that the 3 largest stablecoins worldwide (Binance USD, Tether and USD Coin) together represent about 75% of the trading volumes. This would exceed the EU’s new rules and limits.
More euro stablecoins
This is expected to significantly reduce the competitiveness of such stablecoins in the EU. Stablecoins are a type of cryptocurrency designed to hold a constant value, such as that of the euro or dollar.
In turn, the new developments could lead to more stablecoins pegged to the euro entering the crypto market. This is a development that is good in itself, given that most stablecoins are currently pegged to the US dollar.
In fact, the stablecoin Tether is so large that it is the third largest cryptocurrency in the world. The stablecoin has a market capitalization of $68 billion. The euro version of the same stablecoin has only $202 million in market cap by comparison. Finally, this shows the big difference between the two versions.