With the implementation of the EU's MiCA regulations on December 30, Euro-denominated stablecoins are set for significant growth, according to a JPMorgan research report released on Wednesday. Analysts led by Nikolaos Panigirtzoglou emphasize that only compliant stablecoins can now be utilized as trading pairs in regulated markets, compelling EU exchanges to modify their offerings.

This regulatory shift has positioned compliant stablecoins like Circle's EURC favorably, while non-compliant coins, such as Tether's EURT, encounter hurdles.

Stablecoins are a type of cryptocurrency designed to maintain a stable value, typically pegged to the U.S. dollar but also linked to other currencies and commodities like gold.

The Markets in Crypto-Assets (MiCA) regulation represents the EU's first comprehensive framework for digital assets, setting stringent requirements for crypto service providers, issuers and traders operating within the bloc.

The legislation, which begins implementation in June 2024, mandates strict consumer protection measures, environmental impact disclosures and reserve requirements for stablecoin issuers, while requiring crypto businesses to obtain authorization from national regulators.

The new regulations necessitate that stablecoin issuers like Tether hold substantial reserves in European banks and obtain trading licenses. Consequently, Tether has ceased its EURT stablecoin and seen the delisting of USDT on multiple EU-based exchanges, as noted by JPMorgan. In November, Tether announced a phased withdrawal of its euro stablecoin, offering token redemption for up to a year.

Despite these obstacles, Tether remains a "dominant force" in the global stablecoin market, with extensive use in Asian territories where regulatory constraints are less stringent. Tether's investment in MiCA-compliant issuers such as Quantoz Payments underscores its intention to sustain a presence within the EU.

The company also disclosed in December its investment in the European stablecoin issuer, StablR.