Coinbase will end USDC rewards in the EEA starting Dec. 1, 2024, due to MiCA regulations, impacting stablecoin rewards and compliance in the region - IcoHolder.

Coinbase, one of the world's leading cryptocurrency exchanges, has announced it will discontinue its USD Coin (USDC) rewards program for users in the European Economic Area (EEA) starting December 1, 2024. This decision comes in response to the implementation of the new Markets in Crypto-Assets (MiCA) regulation, which introduces stricter compliance standards for digital assets in the region.

The MiCA regulation, which came into effect in June 2023, mandates that e-money tokens, like USDC, be issued by licensed credit or electronic money institutions. Issuers must meet stringent requirements, including ensuring that reserves backing tokens are secure, accessible, and well-managed. Additionally, tokens must be redeemable at any time for their full nominal value, further emphasizing the need for robust reserves and regulatory compliance.

Coinbase’s rewards program, which allowed users to earn daily yields on their USDC holdings, operated across more than 100 jurisdictions worldwide, offering an annual percentage yield (APY) that varied by location. The program had become a popular way for users to grow their crypto assets with relatively low risk. However, as the MiCA regulation imposes new restrictions, Coinbase will halt the program for EEA users to comply with the evolving regulatory landscape.

As of November 30, 2024, qualified users in the EEA will still receive USDC rewards, with the final payout set to be distributed within the first 10 business days of December. This move is part of a broader shift in the cryptocurrency industry as exchanges and stablecoin issuers adjust to the MiCA requirements. Alongside Coinbase, other platforms like Uphold, Bitstamp, and Tether have also announced their plans to align with the MiCA regulations, which will reshape the stablecoin market in Europe.

The new rules outlined by MiCA are designed to bring stability and trust to the crypto market, ensuring that e-money tokens are not only backed by sufficient reserves but also governed by clear guidelines on their issuance and redemption. One significant aspect of the regulation is its prohibition on interest-bearing e-money tokens, which is a key factor in Coinbase's decision to end its rewards program for USDC.

As cryptocurrency regulations tighten globally, the MiCA framework sets a new standard for stablecoin issuers in the European Union, bringing the region closer to a regulated crypto market while aiming to protect consumers and ensure the long-term stability of the industry.