The Impact of MiCAR on the Stablecoin Market
This article explores the early effects of MiCAR on euro-pegged stablecoins using an event study and a difference-in-difference analysis. It examines the impact of MiCAR’s approval on returns, volatility, and trading volumes. Overall, returns and volatility showed no significant changes, consistent with stablecoins’ claim to maintain a stable value. Trading volumes were also largely unaffected. Larger stablecoins, however, exhibited a positive return response, which may reflect increased confidence following MiCAR’s introduction.
MiCAR: Europe’s Rulebook for Stablecoins
Over the past few years, attention towards cryptocurrencies such as Bitcoin has increased significantly. However, due to their substantial price volatility, cryptocurrencies are considered risky assets and therefore not a reliable medium of exchange. In response, so-called stablecoins have emerged. These are digital assets designed to maintain a stable value by being pegged to another asset, such as a fiat currency (e.g. EUR or USD) or a commodity.
Despite their claim of stability, several stablecoins have proven to be less stable in practice. A well-known example is the collapse of TerraUSD in 2022. Such events have revealed potential risks for investors and the broader financial system, underlining the need for clear and harmonised regulation.
To address these concerns, the European Union introduced the Markets in Crypto-Assets Regulation (MiCAR), which was adopted in May 2023 and came fully into force at the end of 2024. MiCAR aims to bring legal certainty to the crypto-asset market, protect investors, and ensure financial stability by setting strict requirements for issuers of stablecoins regarding transparency, reserve management and supervision.
This study focuses on the effects of MiCAR on euro-pegged stablecoins (hereafter referred to as “euro stablecoins”), examining whether the regulation has supported or hindered their development and how these stablecoins have reacted to its approval in terms of returns, volatility, and trading volume.
While prior studies have primarily examined how regulatory events affect cryptocurrencies in general, little attention has been paid to stablecoins. This study seeks to fill that gap by analysing how MiCAR, the first comprehensive EU framework explicitly governing stablecoins, influences their market behaviour and whether these responses differ from those typically observed for other cryptocurrencies. In doing so, it provides insights into whether regulation enhances market confidence and stability within the stablecoin market, or whether it may have unintended effects, such as price instability or limiting growth.
The Emergence of Euro Stablecoins under MiCAR
Research shows that prior to MiCAR’s entry into force, USD-pegged stablecoins, particularly USDT and USDC, dominated both the global and EU stablecoin markets, while euro stablecoins accounted for only a very small share.
Following MiCAR’s enforcement, euro stablecoins complying with the new regulatory framework, such as EURC and EURCV, have gained significant market share within the EU. In contrast, non-compliant stablecoins are increasingly being delisted from European exchanges. Since MiCAR imposes stricter requirements on significant stablecoins and those denominated in non-EU currencies, most delisted tokens are large USD-pegged stablecoins, including USDT, FDUSD, and TUSD.
At the same time, new MiCAR-compliant stablecoins have entered the EU market, including EURR, EURQ, and EURI, issued by newly authorised institutions under MiCAR.
MiCAR’s Approval and its Influence on Euro Stablecoin Returns
Event Study Approach
The effects of MiCAR’s approval on the returns of euro stablecoins are examined through an event study. The analysis focuses on five euro stablecoins: EURT, EURC, EURS, EURA, and Celo EUR. The dataset consists of daily opening and closing prices obtained from CoinGecko, from which daily returns were calculated.
This approach assessed MiCAR’s impact on the cumulative average abnormal return (CAAR) of these stablecoins and provides insights into how market participants perceived the regulation. A positive perception would likely result in an increase in value, while a negative perception would have the opposite effect.
To explore whether the magnitude of the effect differs across stablecoins, the analysis was repeated for the three largest stablecoins, namely EURT, EURS, and EURC, which are generally more transparent and traded on more liquid markets.
The event date, 20 April 2023, marks the European Parliament’s approval of MiCAR, which created considerable certainty about its implementation and likely led market participants to adjust their behaviour in anticipation of MiCAR’s entry into force. The event window spans 17–22 April 2023, while the estimation period covers 10 January–10 April 2023.
Big vs Small Stablecoins: Differences in Market Perceptions
When analysing all five stablecoins, the approval of MiCAR had no statistically significant impact on returns. Robustness checks confirm this finding across the examined event windows. This outcome may reflect the stablecoins’ goal of maintaining a stable value, which limits price fluctuations in response to regulatory news. Alternatively, it could suggest that MiCAR’s approval neither substantially increased investor confidence in market conditions nor was perceived as harmful.
In contrast, when the analysis is restricted to the three largest stablecoins of the sample, the approval of MiCAR showed a statistically significant positive effect. This suggests that the impact of MiCAR varies according to specific characteristics of the stablecoins. The result aligns with the expectation that regulatory events have a more pronounced effect on stablecoins issued by more transparent entities and traded on more liquid markets, characteristics typically associated with larger stablecoins. Furthermore, these findings suggest that MiCAR is perceived as a regulatory framework that enhances market conditions, at least for the larger euro stablecoins.
Beyond Returns: Examining Volatility and Trading Volume
Difference-in-Difference Approach
To assess the effect of MiCAR’s approval on the volatility and trading volume of euro stablecoins, a difference-in-difference model was applied. The treatment group consists of seven euro stablecoins that are directly affected by MiCAR, as they are primarily circulated within the EU. Since MiCAR essentially covers all types of stablecoins, the control group comprises non-euro stablecoins issued by non-EU entities and primarily traded outside the EU, minimising their exposure to MiCAR’s effects on trading volumes and volatility.
As in the event study, daily data were retrieved from CoinGecko. Trading volumes were taken directly from the dataset, while volatility was computed from the daily opening and closing prices. The sample period spans 20 March–20 May 2023, covering one month before and one month after MiCAR’s approval.
To ensure that the results captured the effect of MiCAR rather than other influences, several control variables were included: the Crypto Volatility Index (CVI) to account for broader fluctuations in the overall cryptocurrency market, two dummy variables indicating MiCAR compliance and backing mechanism (fiat- or crypto-backed), and time and stablecoin fixed effects to control for general market trends and characteristics that remained constant for each stablecoin over time.
Unlike the event study, the difference-in-difference analysis focuses on overall effects and does not explore variation between the stablecoins. This choice was made due to constraints on the length of the paper.
The table below (Table 1) summarises and describes the stablecoins included in the treatment and control groups.
Findings: Limited Impact on Volatility and Volume
The difference-in-difference analysis indicates that MiCAR had no statistically significant effect on the volatility or trading volumes of stablecoins in the treatment group. The result on volatility suggests that these stablecoins maintained price stability despite uncertainties surrounding MiCAR, such as potential compliance costs. Similarly, trading volumes appear largely unaffected by the regulatory event. It is also possible, however, that the period analysed was too early in the regulatory process for the effects to be fully reflected in prices and trading volumes.
Conclusion MiCAR’s Effects on Euro Stablecoins
MiCAR is reshaping the EU stablecoin landscape, with compliant euro stablecoins gaining market share while non-compliant, mainly USD-based ones, are being delisted from European exchanges. Although MiCAR’s approval had no significant effect on overall returns, volatility, or trading volumes during the examined period, larger and more transparent euro stablecoins showed a positive reaction in returns, suggesting that its effect may differ across stablecoins and that regulation can bolster investor confidence. Considering these differences and the potential long-term effects beyond the study’s short observation period, further research is needed to fully understand MiCAR’s impact on stablecoins.
For the full research, see the economic paper “The effect of MiCAR on the returns, volatility and trading volume of euro stablecoins: an event study and a difference-in-difference analysis” in the master’s thesis E-money vs E-money Tokens: a Legal-Economic Perspective. The thesis also includes a legal study on MiCAR (“E-money vs E-money Tokens: A Comparative and Evaluative Analysis of EU Regulation”), which provides useful context and insight into the regulatory framework.
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