Regulatory Requirements for Asset-Backed Stablecoins in the EU: A MiCA Overview

Understanding MiCA's Mandate for Asset-Backed Stablecoins

Since the implementation of the Markets in Crypto-Assets Regulation (MiCA) in the European Union, asset-backed stablecoins—referred to as Asset-Referenced Tokens (ARTs)—are subject to stringent regulatory requirements.

These measures aim to ensure consumer protection, market integrity, and financial stability within the EU's digital finance ecosystem.

To offer or list an ART within the EU, entities must adhere to the following prerequisites:

• Authorization: Obtain approval from a competent national authority within the EU.

• Legal Entity: Operate as a legal entity established in the EU.

• White Paper: Publish a comprehensive white paper detailing the token's characteristics, rights, and obligations.

• Reserve Assets: Maintain adequate reserves to back the token's value, ensuring liquidity and stability.

Failure to comply with these requirements prohibits the public offering or listing of the stablecoin within the EU.

Exceptions to the Authorization Requirement

MiCA provides limited exemptions from the authorization mandate for ARTs under specific conditions:

1. Limited Circulation: If the average outstanding amount of the ART does not exceed €5 million over a 12-month period, and the issuer is not part of a network of issuers seeking to circumvent the regulation.

2. Qualified Investors Only: If the ART is offered exclusively to qualified investors.

Even in these cases, the obligation to publish a white paper remains.

Case Studies : Tether Gold and PAX Gold Under MiCA

Tether Gold (XAUT) and PAX Gold (PAXG) are prominent examples of asset-backed stablecoins pegged to the value of gold. Currently, neither is authorized under MiCA. To offer or list these tokens within the EU, their issuers would need to:

• Establish an EU-Based Entity: Set up a legal entity within an EU member state.

• Obtain Authorization: Secure approval from the relevant national competent authority as an ART issuer.

• Comply with Reserve Requirements: Ensure that the tokens are fully backed by reserves, with transparent and regular reporting.

• Publish a White Paper: Provide detailed documentation outlining the token's features, rights, and associated risks.

Without fulfilling these obligations, Tether Gold and PAX Gold cannot be legally offered or listed in the EU.

Navigating MiCA Compliance for Stablecoins

The introduction of MiCA marks a significant shift in the regulatory landscape for stablecoins within the EU. Issuers of asset-backed stablecoins must undertake comprehensive compliance measures to operate legally in this jurisdiction. This includes obtaining proper authorization, maintaining sufficient reserves, and ensuring transparency through detailed disclosures.

As the EU continues to refine its digital finance regulations, staying informed and proactive in compliance efforts is essential for stablecoin issuers aiming to access the European market.

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