The third quarter of 2024 saw a surge in stablecoin use and adoption, according to Coinbase’s 4th Quarter Guide to Crypto Markets report with Glassnode. 

Stablecoins hit an all-time high market capitalization of nearly $170 billion in Q3 2024, according to the report. This growth occurred alongside the implementation of the European Union’s new Markets in Crypto-Assets regulation, which introduced clearer rules for stablecoin operations.

Stablecoins have become a key tool for users seeking faster, cheaper, and more secure transactions. Their utility in payment systems, including remittances and cross-border transfers, has continued to expand. 

Recently, Anthony Pompliano argued that tech innovations outside of crypto could lead to a new era in which stablecoins become the primary transaction medium in a machine-driven economy. This increased adoption reflects the growing role of stablecoins in crypto trading and real-world financial systems.

According to the report, stablecoin volumes have reached nearly $20 trillion year-to-date as of the third quarter, indicating their growing role in the global economy.

Stablecoin and Bitcoin dominance

Stablecoin dominance also increased in Q3 alongside Bitcoin (BTC), with crypto investors gravitating toward what they see as the highest-quality digital assets.

The current BTC cycle closely tracks the 2015-2018 and 2018-2022 cycles, which ended with nearly 2,000% and 600% returns, according to the report. 

What is MiCA?

The Markets in Crypto-Assets Regulation is a comprehensive framework enacted by the European Union in June 2023 to regulate the crypto industry across its 27 member countries. It initiates a 12-18 month transition period for implementing rules on anti-money laundering, combating the financing of terrorism and digital asset custody, among others.

MiCA’s impact on stablecoins still remains to be seen, but Tether (USDT) CEO Paolo Ardoino expressed concern that MiCA’s 60% cash reserve requirement for stablecoins could create systemic risks for European banks. He argued that such regulations might exacerbate liquidity issues during large-scale redemptions, potentially leading to bank failures.

Crypto exchange Coinbase is set to delist unauthorized stablecoins from its European branch by year-end, in response to incoming MiCA regulations.

U.S.-based cryptocurrency exchange Coinbase will remove all non-compliant stablecoins from its European exchange by the end of this year, as the company moves to comply with the European Union’s new crypto regulations, Bloomberg has learned.

The Markets in Crypto-Assets framework, which came into effect in June for stablecoin issuers, requires companies to hold e-money authorization in at least one Europe’s member state. Further regulatory guidelines for exchanges like Coinbase will be enforced starting Dec. 31.

A spokesperson for Coinbase told Bloomberg that the exchange plans to restrict services related to non-compliant stablecoins, including Tether’s (USDT) by Dec. 30. The exchange will provide users with an update in November, outlining options to convert their holdings to alternatives such as Circle’s USD Coin (USDC).

In early July, French blockchain analytics firm Kaiko said in a research note that Circle has benefited from the MiCA regulations, with its stablecoins experiencing significant increases in daily trading volumes following the introduction of the new requirements.

Still, industry leaders have expressed concerns about the regulations. For instance, Tether CEO Paolo Ardoino cautioned that stringent cash reserve requirements could pose systemic risks to banks.

The delisting trend is not limited to stablecoins as Kraken recently announced it would halt trading and deposits of Monero (XMR) in the European Economic Area due to regulatory changes, following similar moves by Binance and OKX.

The MiCA Crypto Alliance launched today with key blockchain players Ripple, Hedera, and Aptos Foundation joining as founding members.

Backed by the DLT Science Foundation, this alliance aims to help crypto firms navigate new regulations in the European Union more effectively, particularly the Markets in Crypto Assets regulation, according to a DLT Science Foundation post.

Ripple (XRP), Hedera (HBAR), and Aptos Labs (APT) have joined forces to improve transparency and encourage innovation in blockchain technology. The DLT Science Foundation, which is also behind this initiative, plans to work closely with businesses and developers to foster a compliant and sustainable future for cryptocurrencies.

MiCA regulation

The MiCA regulation is part of the EU’s broader push to create a safe and innovative digital asset environment. It requires CASPs to publish details on the impact of climate change on their operations. 

This regulation demands strict disclosures from service providers, including centralized exchanges, to ensure transparency and sustainability.

However, many firms struggle to meet these requirements due to the lack of a standardized process. The MiCA Crypto Alliance seeks to address this by offering members access to advanced tools that streamline compliance.

According to DLT, these tools will assist with sustainability assessments and white paper creation, making it easier for firms to meet the required standards.

For those unfamiliar with the technical aspects, MiCA is a set of rules aimed at making the cryptocurrency world more transparent. Just like traditional financial systems follow regulations to ensure fair operations, the Markets in Crypto Assets regulation ensures that crypto firms do the same.

By offering tools and resources, the alliance helps companies comply with these new rules without being overwhelmed by the complexity of crypto-specific regulations. The DLT Science Foundation will provide strategic guidance and technical support to members of the MiCA Crypto Alliance, helping them adapt to the evolving regulatory environment.