Coinbase Ends USDC Rewards in Europe

Crypto exchange Coinbase has announced it will discontinue its USDC Rewards program for customers in the European Economic Area (EEA) starting December 1, 2024. The move comes as part of the exchange’s efforts to comply with the European Union’s Markets in Crypto-Assets (MiCA) regulations.

In an email sent to users on Thursday, Coinbase confirmed the termination of its popular yield program, which enabled customers to earn rewards on their holdings of the USDC stablecoin. Final payments will be distributed within the first ten business days of December 2024, with rewards still accruing on balances through November 30.

Why the Change?

MiCA’s Impact on Stablecoins

Introduced in June 2023, MiCA classifies stablecoins like USDC as electronic money tokens (EMTs). The regulation imposes strict requirements on issuers, including:

• Banning interest-earning features.
• Mandating sufficient reserves to back tokens.
• Requiring e-money authorization in at least one EU member state.

MiCA’s intent is to ensure greater stability and consumer protection in the rapidly evolving crypto sector. However, these measures have also led to dissatisfaction among users and companies alike.

User and Industry Reactions

Many Coinbase customers have voiced frustration with the upcoming changes. Paul Berg, co-founder of Sablier, sarcastically tweeted his “gratitude” to the EU for shielding him from earning rewards on USDC. Similarly, Ripple’s CTO David Schwartz criticized the regulations, calling them a barrier to offering “pro-consumer” services.

Coinbase’s Response to MiCA

Adjusting to Compliance

Coinbase had already hinted at such adjustments in October, signaling plans to delist or modify non-compliant tokens ahead of MiCA’s full enforcement on December 30, 2024. At the time, the exchange assured customers it would provide a detailed transition plan, encouraging a shift to compliant stablecoins like USDC and EURC.

Industry Ripple Effects

Coinbase isn’t the only company feeling the regulatory squeeze. Stablecoin issuer Tether recently announced it would stop minting euro-backed tokens, citing challenges posed by MiCA. Instead, Tether plans to focus on expanding Hadron, its platform for asset tokenization.

The Broader Implications

The discontinuation of USDC Rewards reflects a growing trend of regulatory frameworks shaping the future of crypto in Europe. While MiCA aims to safeguard consumers and standardize operations, it has also led to the removal of features that many users find valuable.

As companies like Coinbase and Tether adapt to the new rules, the crypto landscape in Europe is poised for significant transformation. Whether these changes will strike the right balance between innovation and regulation remains to be seen.