Coinbase Cuts USDC Rewards In EEA Amid Regulatory Changes

Coinbase has announced that it will stop giving USDC rewards to users in the European Economic Area (EEA) from December 1. This decision was made because of new rules under the Markets in Crypto-Assets (MiCA) regulation, the exchange explained in an email sent to customers on November 28.

Eligible users will still be able to earn rewards on USDC until November 30. The last rewards will be given out within the first 10 working days of December.

Coinbase’s rewards program gave users the opportunity to earn daily interest on USDC held on the platform. This program was offered in more than 100 countries, with the interest rate varying based on local rules and economic conditions.

MiCA Wants Stablecoins To Stay Stable And Not Be Seen As Financial Products

MiCA, which took effect in June 2023, introduces new rules for e-money tokens like USDC. Companies that issue these tokens must be authorized as credit or electronic money institutions.

These companies will need to follow strict rules, including managing reserves and liquidity in a responsible way. They will also not be allowed to offer interest on e-money tokens to make sure the tokens remain stable and are not considered financial products.

MiCA requires stablecoin issuers to meet new standards for liquidity, transparency, and protecting consumers.

Coinbase has told its affected customers in the EEA that they can choose to switch to stablecoins issued by licensed companies, like Circle’s USDC and EURC. These stablecoins are tied to the value of the US dollar and euro, respectively. Stablecoins have become widely used recently, with firms like PayPal also starting to use them in their services.

Coinbase has plans to add proof of reserves (PoR) to its new Bitcoin wrapper, Coinbase Wrapped BTC (cbBTC). A spokesperson for Coinbase confirmed this on September 30. Adding proof of reserves will bring cbBTC up to the same level as other popular Bitcoin wrappers like Wrapped Bitcoin (WBTC) and 21.co Wrapped Bitcoin (21BTC). It will also help Coinbase be more transparent, which was a concern for many.

Proof Of Reserves Is Part Of Coinbase’s Plan For cbBTC And Will Be Added In Time

Lukas Staniszewski, a product manager at Coinbase noted that the company has planned to add Proof of Reserves (PoR) to cbBTC from the very start, and the team is working hard to make it happen. Coinbase said proof of reserves has always been part of its plans for cbBTC, and it will be added in time.

Coinbase also faced criticism for not being as open as some of its competitors. There were also rumors that Coinbase was issuing unsupported Bitcoin IOUs to BlackRock, a major crypto exchange-traded fund (ETF) sponsor.

Launched on September 12, Coinbase’s cbBTC has become very popular, with $250 million in total value locked (TVL), per reports. cbBTC is different from other Bitcoin wrappers because it promises to refund users for losses caused by certain cybersecurity issues. It is also carefully monitored by New York’s Department of Financial Services to make sure everything is running safely and securely.