EU names USDC its first significant stablecoin, putting it under EBA oversight from Nov. 12

The European Banking Authority (EBA) has classified Circle's dollar stablecoin USDC as a "significant e-money token" under the EU's Markets in Crypto-Assets Regulation (MiCA). In a press release on Oct. 14, the EBA said USDC is the first of the 45 e-money tokens notified in the EU under MiCA to be classified as significant. From Nov. 12, USDC will be supervised jointly by the French supervisor and the EBA.

Three criteria make a token significant

MiCA defines an e-money token as a stablecoin that references the value of a single official currency, such as the dollar or the euro. Article 56 of the regulation requires the EBA to classify such a token as significant when at least three of the criteria in Article 43 are met. They include more than 10 million holders, more than 5 billion euros in tokens issued or market capitalization, more than 2.5 million daily transactions and 500 million euros in average daily transaction value, international use for payments and remittances, interconnectedness with the financial system, and whether the issuer issues another token while also providing crypto-asset services.

The indicators used for the significance assessment are set out in Commission Delegated Regulation (EU) 2024/1506. The classification is not a one-off: the EBA reassesses it every year.

Reserves move to the EBA, governance stays in France

Until now, Circle Internet Financial Europe SAS, which issues USDC in Europe, has been supervised solely by France's Autorité de Contrôle Prudentiel et de Résolution (ACPR). From Nov. 12, supervision will be split. Own funds, the reserve of assets, liquidity requirements and recovery and redemption plans move to the EBA, while governance, qualifying holdings, fit and proper assessments, outsourcing and conflicts of interest remain with the ACPR. The two authorities said they will cooperate closely during the transition.

The EBA sets up and chairs a supervisory college for each issuer of a significant token. According to the EBA, day-to-day supervision is carried out mainly off-site at its premises, while on-site inspections are planned each year for specific issuers, focusing on particular risk areas. European crypto-asset service providers report their customers' token holdings to issuers daily, and issuers report the data to the EBA every quarter. The issuer deadline for third-quarter data is Nov. 11, one day before dual supervision begins.

Stricter rules apply to issuers of significant tokens. Under Articles 58 and 45 of MiCA, an issuer must hold own funds equal to 3% of the average amount of its reserve of assets and must have a liquidity management policy. It must also undergo an independent audit of its reserve every six months from the date the token is classified as significant.

Information sharing with New York's regulator

In the United States, USDC is issued by Circle Internet Financial, LLC. The EBA said it signed a memorandum of understanding with the New York State Department of Financial Services (NYDFS) on information exchange and cooperation to address cross-border stablecoin activity.

Circle began issuing USDC and its euro stablecoin EURC under MiCA rules on July 1, 2024, using an electronic money institution license from the ACPR. At the time, Circle said it was the first global stablecoin issuer to comply with MiCA. USDC's market capitalization stood at about $72.6 billion on the morning of Oct. 15, according to CoinGecko.

Korean trading is 1.5% of Tether's

USDC trades in the Korean won markets of both Upbit and Bithumb. Around 10:30 a.m. KST on Oct. 15, it traded at 1,358 won on Upbit and 1,356 won on Bithumb. At the same time it traded at 1.0011 USDT on Binance, or about 1,341 won, putting the kimchi premium (the gap between prices on Korean exchanges and global markets) at about 1.2% on Upbit. Trading value over the past 24 hours was about 1.19 billion won on Upbit and about 1.22 billion won on Bithumb. Upbit's USDC trading value was roughly 1.5% of the approximately 81.9 billion won traded in its Tether (USDT) won market over the same period. Circle's euro stablecoin EURC is also listed in Upbit's won market.