Impacts of USDT Delisting in the EU This Year
Recent communications from Crypto.com indicate significant changes regarding the trading of certain tokens, including USDT, for users in EU countries. This action arises in response to new regulatory frameworks shaped by the EU’s Markets in Crypto-Assets Regulation (MiCA). The shift underscores key compliance issues, particularly for the issuer of USDT, Tether, which lacks EU recognition as an electronic money provider. This year marks a pivotal moment for users navigating this evolving landscape.
Crypto.com’s Announcement on USDT Delisting 🎉
As outlined by Crypto.com, starting January 31, 2025, several services on its platform for EU residents will cease. While the specific services affected remain vague, staking for tokens like ETH and SOL is confirmed to be discontinued. Other tokens facing similar service limitations include:
- USDT
- DAI
- PYUSD (PayPal USD)
- PAX (Pax Dollar)
- PAXG (Pax Gold)
- WBTC (Wrapped Bitcoin)
- LCRO (Liquid CRO)
- XSGD
Importantly, Crypto.com’s message specifically references the purchase of these tokens without making clear statements about selling or withdrawing them.
Understanding the New EU Regulations 🏛️
The MiCA framework officially launched last year but allows for a transition period. An official announcement from the European Securities and Markets Authority (ESMA) confirms that non-compliant token services will be halted in the EU from January 31. However, some arrangements remain for users to sell or withdraw tokens until March 31. A prior statement from ESMA suggested an extension until July 2026, leaving some uncertainty in implementation.
As a result, Crypto.com has opted to comply with the latest ESMA guidelines, leading to restrictions on purchasing USDT and similar tokens on their exchange. However, users may still retain the option to sell these tokens for fiat currencies or authorized stablecoins.
Exploring USDT (Tether) 🚀
The crux of the matter, according to ESMA’s recent communication, is that the updated EU regulations prohibit centralized exchanges from facilitating services related to non-compliant asset-referenced tokens (ART) and electronic money tokens (EMT). ART tokens are backed by other assets (e.g., PAXG, DAI), while EMT refers to stablecoins pegged to fiat currencies (like USDT).
For a token to be considered compliant under MiCA, the issuer must be recognized by the EU as an authorized electronic money provider. Since Tether has not received such recognition, USDT does not meet the EMT compliance standard. The same rationale applies to DAI, which is operated by decentralized contracts lacking a single managing authority. Thus, EU residents no longer have the ability to use tokens like USDT or DAI on centralized exchanges. They can, however, utilize these tokens on non-custodial wallets and decentralized exchanges (DEXs).
Guidance for Handling USDT Delisting on Crypto.com 📝
Currently, Crypto.com appears to be the only known exchange announcing a halt on USDT services within the EU. Some other exchanges had already limited certain services earlier. Users have until March 31 to execute sales or withdrawals of USDT, DAI, and other tokens that do not comply with EU regulations. It’s crucial to note that these restrictions impact primarily centralized exchanges. Some exchanges operating outside EU regulations might still accommodate these tokens.
EU users can maintain access to USDT, DAI, and other non-compliant tokens through non-custodial wallets, which do not require identity verification, and on decentralized exchanges that function similarly to non-custodial wallets. To operate within centralized exchanges, users may consider converting their holdings into compliant stablecoins like USDC or await potential regulatory changes that might render USDT compliant in the future.
Prospects for Tether’s Compliance with MiCA Regulations 🔍
The future of Tether’s compliance with MiCA seems uncertain, as the company does not appear inclined to pursue recognition as an electronic money issuer in the EU. Tether perceives the necessary compliance steps as risky, primarily since compliance entails transferring collateral from U.S. bonds to cash reserves in European banks. Given the instability surrounding bank-held collateral, such as was observed with USDC in March 2023, Tether views its existing bond holdings as safer.
In fact, Tether previously encountered issues when certain assets were frozen due to complications involving their bank, highlighting the concerns associated with cash collateral. Thus, Tether’s preference for retaining U.S. bond holdings stems from both profit motives and risk management considerations.
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