Why did Coinbase discontinue the USDC reward program for European users?

Effective December 1, Coinbase will officially cease its USDC reward program in the European Economic Area. As the world's leading cryptocurrency trading platform, this decision has triggered widespread attention and discussion. The reason behind this is not simple. This is not only the adjustment of the company's internal strategy, but more importantly, the response and adaptation to the emerging crypto asset market regulatory system. This article will explore the underlying motivations for Coinbase to discontinue the USDC reward program from a compliance perspective, combined with the impact of the European Market Cryptoassets Act (MiCA).

1. MiCA New Regulations: Unified Crypto-Asset Supervision Framework

The European Crypto-Asset Market Supervision Act (MiCA) is the first comprehensive crypto-asset regulatory framework at the EU level , passed this year and expected to officially take effect in 2024. The core goal of MiCA is to establish a transparent, controlled and unified regulatory environment for crypto assets to better protect investors and promote market stability and innovation. Specifically, MiCA imposes strict requirements on stablecoins (referred to as electronic money tokens (EMTs) in the regulations), in particular detailed provisions on reserve adequacy, transparency, issuer registration and authorization. .

For stablecoins like USDC that are pegged to the U.S. dollar, MiCA stipulates that the issuer must obtain an Electronic Money Institution (EMI) license and ensure a reserve fund for the stablecoin Match its circulation. These reserves must be deposited in trusted banks or other financial institutions in strict compliance with regulatory requirements, and issuers must regularly disclose details of their reserves to ensure transparency of their funds. These requirements not only increase compliance costs for issuers, but also mean that crypto service providers like Coinbase must rethink their compliance strategies.

European MiCA Act Ten Thousand Words Research Report: Comprehensive interpretation of the Web3 industry, The far-reaching impact of DeFi, stablecoins and ICO projects

Long article analyzing the historical opportunities and starting points for Circle to be qualified to issue USDC and EURC in compliance with the MiCA Act

p>2. Coinbase’s choice: Comply or give up?

As a direct response to MiCA, Coinbase has chosen to discontinue its USDC rewards program in Europe. The essence of this reward program is to provide users with benefits from holding USDC, and this benefit willTo a certain extent, it may be regarded as a financial product similar to interest. According to the regulations of MiCA, any business involving stable currency income may trigger higher regulatory thresholds, such as the need to obtain additional financial licenses, meet higher transparency requirements, and even require more stringent risk assessment and disclosure. Therefore, discontinuing this program became a pragmatic choice for Coinbase to comply with MiCA regulatory standards.

Compliance costs and regulatory risks are important considerations behind Coinbase's decision. Continuing to offer the USDC rewards program to European users under the MiCA framework will mean that more resources will be needed to apply for new licenses and strengthen the disclosure management of reserves. This will undoubtedly result in additional compliance expenses and operational pressure for Coinbase. Therefore, at this stage, choosing to suspend the reward program is a strategy for optimal allocation of resources, especially as the crypto market remains in a context of high volatility and uncertainty, and maintaining flexibility is crucial.

3. Bitstamp and Tether: Other encryption companies are also adjusting

It is worth noting that Coinbase is not the only encryption company to make adjustments to MiCA supervision. For example, Bitstamp also recently announced that it has suspended some crypto asset trading services that do not comply with MiCA regulations, while Tether is stepping up preparations for compliance disclosure of its reserves. These initiatives show that the implementation of MiCA has become a key force in driving the entire industry to adjust itself.

One of the purposes of MiCA is to harmonize regulatory standards for crypto-assets across EU member states, thereby making it easier for all crypto-asset providers to achieve market access and compliance. There are clear guidelines. This unification not only provides a clear direction for the development of the industry, but also inevitably increases the entry barriers for practitioners, especially in the face of small enterprises with insufficient capital and compliance capabilities.

French Financial Authority: Begins to accept applications for CASP licenses under the MiCA Act , Bybit withdrew from the French market due to lack of license

EU MiCA regulations are about to take effect: Bitstamp and Binance are the first to remove non-compliant stablecoins

4. MiCA : New opportunities under the wave of compliance

Although MiCA’s new regulations mean an increase in compliance costs in the short term, in the long term, it helps create a healthier and more stable investment environment for the European crypto-asset market. For an international platform like Coinbase, complying with regulatory trends and actively complying with regulations is not only a manifestation of corporate social responsibility, but also an important means to gain market trust and consolidate industry status.

In addition, the arrival of MiCA is also an opportunity for Web3 companies and practitioners. The crypto industry has been plagued by compliance uncertainty in the past, with investors generally concerned about the legality and safety of crypto assets. With the implementation of MiCA, these concerns will be alleviated to a certain extent, and the entire industry is also expected to usher in a new round of capital influx and innovative development.

For Coinbase, while suspending the USDC reward program may mean a loss of market share in the short term, it will have a better chance by complying with MiCA's new regulations Gain a leading position in the compliance market of the future. This also provides a reference for other Web3 companies: compliance is not just a burden, it can also be an opportunity for companies to gain a foothold in the market and promote industry development.

How will the MiCA bill reshape the European stablecoin market?

[Stable Coin] USDC will benefit from the new EU digital asset Mica regulations and seize USDT market share

French financial institution SG Forge is qualified to issue stablecoins under the MiCA Act and white paper analysis

Banking Circle launches EURI, the EU’s first compliant stablecoin: Technological innovation and market opportunities under the MiCA framework

5. Conclusion

Coinbase’s decision to stop the European USDC reward program reflects MiCA’s profound impact on the entire encryption industry. As a unified regulatory framework, the implementation of MiCA will promote the standardization and maturity of the crypto asset market. For Web3 companies, compliance is not only a challenge, but also an opportunity to win trust and expand the market.

In the new regulatory environment, how to balance compliance costs and business innovation will become a question that every Web3 practitioner and organization needs to think deeply about. This is also Aiying will consider customers from a business perspectiveConsider the best cost-effective compliance solution. Aiying will continue to pay attention to the developments in the European market and the MiCA Act to provide industry practitioners with more interpretation and support on compliance.