Circle receives an EMI license

On July 1, 2024, Circle obtained an Electronic Money Institution (EMI) license, granting it permission to issue dollar- and euro-backed cryptocurrency tokens within the European Union.

With it, Circle becomes the first global stablecoin issuer to achieve compliance with the Markets in Crypto Assets (MiCA) regulatory framework.

Source: X

This development establishes Circle, the issuer of the USDC stablecoin, as a significant (and for one, the only licensed) player in the EU's digital asset sector, which encompasses 450 million people across 27 member states.

Circle's European subsidiary, Circle Mint France, will issue both USDC and EURC “as fully compliant dollar and euro stablecoins to the European market”, said Jeremy Allaire, Co-Founder and Chief Executive Officer at Circle.

Some facts about MiCA, EMD, and EMT under MiCA

To understand well what the news means, it is important to have a clear idea about how digital assets are regulated in Europe.

MiCA (Markets in Crypto-Assets Regulation) and EMD2 (Electronic Money Directive 2) are regulatory frameworks in the European Union that govern digital financial assets, but they differ in their focus and scope.

EMD2 is an established directive that regulates electronic money institutions (EMIs). It sets rules for the creation, distribution, and redemption of electronic money, which is defined as a digital representation of traditional fiat currency.

MiCA, in contrast, is a newer regulation designed to oversee the broader crypto-asset market in the EU. It encompasses a wide range of crypto-assets and the service providers in this sector, including those that may not be directly tied to fiat currencies.

For instance, a company issuing a digital token that represents euros (EURC, for example) would fall under EMD2 regulations. However, if the same company were to issue a token backed by a commodity like gold, it would need to comply with MiCA regulations as an asset-referenced token (ART) issuer.

So, issuers of stablecoins that represent fiat currencies are considered electronic money issuers, thus, they are regulated by EMD and need to comply with all requirements outlined in this directive. If the issuer engages in such activities as trading or exchange of crypto assets, it also shall adhere to the MiCA regulatory framework that is there to regulate activities with crypto assets.

Who has the authorization?

The stablecoin market is dominated by three major players: USDT, USDC, and BUSD, which collectively hold a market capitalization of $120 billion. USDT is issued by Tether Limited, USDC by Centre (a collaboration between Coinbase and Circle), and BUSD by Binance in conjunction with Paxos.

Circle, the company behind USDC, has received a license to operate as an Electronic Money Institution and a registered Digital Asset Service Provider in France. Another company that has the license is Membrane Finance with their EUROe stablecoin. However, with their ranking of 3331, they can hardly compete with the major players in the market.

Tether Limited, one of the major competitors of Circle, currently doesn’t possess authorization as an electronic money institution. To target the European market under MiCA, this company would need to secure one of these two types of licenses. The effect of the regulation can be already observed: some exchanges, including Bitstamp, have already delisted Euro Tether (EURT). Others, such as Binance, announced that they’d restrict unregulated stablecoins even though they didn’t mention what exactly stablecoins they mean.

Binance was known for its BUSD stablecoin. However, following regulatory pressures on BUSD, Paxos which was the stablecoin issuer stopped minting new tokens and redemptions thus effectively ending the active status of the stablecoin. To celebrate the license of the Circle, Binance launched a zero-fee campaign for EUR/USDC spot trading pairs.

Circle is driving the crypto adoption

Circle has established itself as a pioneer in regulatory compliance within the cryptocurrency industry. They were the first crypto company to obtain Electronic Money Transmission Licenses across the United States, as well as the first to secure a BitLicense in New York. In the United Kingdom, Circle led the way by becoming the first crypto company to receive an E-Money Issuance license. Additionally, Circle played a crucial role in developing early models for integrating fiat currencies with public blockchain networks, initially focusing on Bitcoin.

It means that over time, its dominance in the crypto space will be growing, and if other stablecoin issuers aren’t getting the requested licences and permissions, they will end up operating illegally.