The United Arab Emirates (UAE) is poised to become a key destination for crypto and stablecoin ventures seeking refuge from the European Union's (EU) newly implemented Markets in Crypto-Assets (MiCA) regulation.
The regulatory framework, which took full effect on December 30, is creating significant challenges for crypto firms within the 27-member bloc, prompting many to consider relocating, according to industry experts.
The MiCA regulation introduces a pan-European licensing and supervisory regime for crypto-assets, exchanges, and service providers.
MiCA Mandates Stablecoin Issuers to Hold Large Portion of Reserve Rule in EU Banks
Among its stringent requirements, small stablecoin issuers must hold 30% of their reserves in low-risk EU-based commercial banks, while major players like Tether face a mandate to maintain 60% or more in similar institutions.
While aimed at ensuring market stability, these rules are seen as increasing operational costs, potentially undermining the financial viability of many firms.
Uldis Teraudkalns, Chief Revenue Officer at cryptocurrency exchange Paybis, predicts a significant exodus of smaller and even some larger crypto firms from the EU.
"The new regulations will drive companies to look for jurisdictions with more favorable regulatory frameworks," Teraudkalns told Arabian Business.
"The UAE is emerging as a preferred destination due to its crypto-friendly policies and stable regulatory environment."
In addition to the UAE, near-EU jurisdictions such as the UK and Switzerland are also expected to attract crypto firms, depending on the evolution of their regulatory landscapes.
Experts noted that the UAE's proactive positioning as a crypto hub, combined with its clarity on policies, makes it a compelling choice for companies looking to maintain global operations.
MiCA's impact on stablecoin issuers has been particularly notable. The regulation's requirement for substantial capital reserves could prove unsustainable for smaller players in the crypto sector.
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