Coinbase users in Europe have expressed frustration over the region’s evolving crypto regulations after the exchange announced it would discontinue its yield program for the stablecoin USD Coin (USDC). The decision, communicated via email to affected users on November 28, is attributed to the European Union’s Markets in Crypto-Assets (MiCA) regulatory framework. The USDC rewards program will end on December 1 for customers in the European Economic Area (EEA), which includes all EU member states as well as Iceland, Norway, and Liechtenstein.
According to the email, users eligible for the program will continue to earn rewards until November 30.
The announcement quickly drew criticism from the crypto community. Paul Berg, CEO of crypto infrastructure provider Sablier, commented sarcastically on X (formerly Twitter), “Very grateful to the EU for protecting me against earning a yield on my USDC holdings on Coinbase.”
MiCA aims to enhance consumer protection and promote financial stability. The framework imposes strict requirements on stablecoin issuers, distinguishing between asset-referenced tokens (backed by multiple assets) and e-money tokens (pegged to a single fiat currency, such as USDC).
Issuers of stablecoins must maintain sufficient reserves to ensure redemption at any time. They are also required to comply with operational and prudential standards, which include robust governance structures and transparent reporting. While these regulations are intended to safeguard the financial system, some provisions have created operational hurdles for crypto firms. One such clause prohibits interest payments or yields on asset-referenced tokens based on the duration of ownership, effectively making yield programs like Coinbase’s USDC rewards incompatible with MiCA.
This provision, outlined in Article 58 of MiCA, states:
“To reduce the risk that asset-referenced tokens are used as a store of value, issuers of asset-referenced tokens and crypto-asset service providers, when providing crypto-asset services related to asset-referenced tokens, should not grant interest to holders of asset-referenced tokens related to the length of time during which such holders are holding those asset-referenced tokens.”
MiCA’s implementation is being rolled out in phases:
- As of 30 June 2024, regulations for asset-referenced tokens and e-money tokens, such as USDC, have become applicable.
- By 30 December 2024, the full MiCA framework will come into effect, covering all crypto-assets and service providers. Firms must secure necessary authorizations and comply with all operational standards by this deadline or face penalties or restrictions.
Coinbase is not the only entity navigating MiCA’s regulatory challenges. Tether, the issuer of the world’s largest stablecoin USDT, announced on November 27 that it would discontinue support for its euro-backed stablecoin, EURT, citing regulatory hurdles in Europe as a significant factor.
Tether stated that while it prioritizes community needs and operational sustainability, the regulatory landscape for stablecoins in the EU is neither stable nor conducive to fostering innovation. The firm concluded that the current environment does not support the growth of euro-backed stablecoins. Despite ceasing EURT issuance since 2022, Tether’s official discontinuation of the product underscores the growing difficulty for stablecoin issuers in Europe.
Featured Image via Coinbase
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