Exploring the Effects of MiCA on Tether USDT: What You Need to Know 👍
In recent weeks, discussions surrounding the introduction of the MiCA regulatory framework in Europe have intensified, particularly concerning its impact on non-compliant stablecoins like Tether (USDT). This article examines the potential consequences of the new EU regulations for Tether and what they could mean for its future in Europe. Spoiler: at present, there’s not a significant cause for concern. Discover all the details below.
MiCA: New Regulations for Stablecoin Issuers
On December 30th, the MiCA (Markets in Crypto Assets) regulations officially took effect in Europe, instituting new requirements for stablecoin issuers.
This European regulatory framework mandates that companies managing their own electronic tokens must secure specific licenses under the oversight of the European Banking Authority (EBA). Henceforth, only banks and authorized financial institutions will be allowed to engage in trading e-money tokens (EMTs) and asset-referenced tokens (ARTs).
Moreover, the legislation introduces actual constraints for companies, including Tether, with headquarters outside the Eurozone. The MiCA mandates stablecoin issuers to maintain the majority of their reserve assets with a European credit institution.
This presents a considerable challenge for USDT, as roughly 83% of Tether’s reserves are invested in U.S. Treasury securities and cash equivalents.
The CEO of Tether has shown a reluctance to meet these requirements, primarily due to the need to expose the company’s assets to third-party banking institutions.
In Europe, deposits have a guarantee of up to 100,000 euros via the Deposit Guarantee Scheme (DGS); however, the sum Tether would need to secure is significantly larger.
Furthermore, such a strategy could lead to potential depegging, thereby jeopardizing the stability and trustworthiness of USDT.
If the MiCA regulations prove incompatible with Tether’s operations, there exists a possibility that the USDT stablecoin could be rendered illegal in Europe.
How MiCA Affects Tether USDT
Given Tether’s non-compliance with MiCA, many speculated that cryptocurrency exchanges might remove the stablecoin from their platforms.
However, this notion is currently unfounded, as there have been no delistings thus far, with the exception of Coinbase, which supports rival Circle and its USDC currency.
Binance, the world’s largest exchange by trading volume, continues limited support for USDT, allowing trades, deposits, and withdrawals without interruption.
Other significant exchanges like Crypto.com, Bybit, Kraken, Bitget, HTX, Mexc, and Kucoin have not indicated any plans to delist USDT.
It appears that, for the time being, these trading platforms have made a choice to maintain trading services for USDT.
This situation arises primarily because Tether’s asset ranks as the most liquid and prevalent stablecoin in the entire market, with a strong footprint across various blockchains.
In the upcoming months, European regulators may apply pressure on crypto brokers, potentially leading to the removal of USDT from exchanges. However, this remains speculative, with no concrete developments to validate the current concerns surrounding Tether.
In response to these circumstances, Tether is proactively preparing by collaborating with compliant firms such as Quantoz to release a legitimate currency in Europe.
Tether’s Focus Shifts to America and Asia Amid European Challenges
Recent research indicates that Asia contributes approximately 60-70% of annual USDT volumes, with North America in second place at 15-20%. Europe accounts for only 10-15%, while Africa represents a mere 5-10%.
Essentially, relinquishing the European market would only translate into a minor loss in Tether’s presence in the stablecoin crypto landscape.
Even in a scenario where USDT gets delisted in Europe, users in the Eurozone can still trade the coin via decentralized exchanges (DEX).
Additionally, Tether has recently made strides to enhance its presence in America amid the challenges posed by the MiCA regulations.
Last week, CEO Paolo Ardoino revealed that Tether acquired a Digital Asset Service Provider (DASP) license in El Salvador, indicating a strategic move to establish offices in Nayib Bukele’s crypto-enthusiastic island.
Tether aims to capitalize on emerging markets within Central America by promoting stablecoin trading culture.
USDT Maintains Dominance in Stablecoin Trading Volume
Despite the regulatory challenges posed by MiCA, Tether continues to dominate as the leading stablecoin issuer in the crypto sphere.
Since the introduction of the new USDT regulation, its market capitalization has largely remained stable, reflecting a mere 0.37% dip in market dominance.
As it stands, the currency boasts a total worth of approximately 133 billion dollars, enjoying a market share of 64.8% in the stablecoin sector.
From the previous year, its capitalization surged by 45 billion dollars, underscoring its appeal and the robust interest from users.
Furthermore, on-chain data from Visa indicates that Tether’s USDT has consistently led stablecoin trading volumes over the years, exhibiting a clear distinction from its primary competitor, USDC.
Specifically, since April 2019, USDC has never reported higher trading volumes than USDT.
As of now, Tether’s trading volumes are nearly double those of USDC and over 300 times those of FDUSD.
In conclusion, the MiCA regulations present certain challenges, yet Tether’s position in the market appears robust as it continues to adapt to evolving circumstances.
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