Tether now appears to have been affected by regulatory adjustments in Europe. In particular, with the new European Regulation on Markets in Crypto Assets (MiCA) expected to come into full force in its member states by the end of the year, the crypto landscape is being reshaped.
Intended to increase oversight and eliminate illegal practices, MiCA requires that stablecoins traded on centralized exchanges be issued by companies with an e-money license. Several crypto exchanges operating in the EU have responded by delisting the world’s leading stablecoin, Tether’s USDT.
This development has fueled fears about liquidity and investor attractiveness due to the delisting of USDT.
Tether delisted: implications for EU crypto markets
USDT is a stable currency and a key part of the crypto ecosystem as it is an important tool for trading and settling cryptocurrency transactions.
Banning access to Tether across the continent could backfire on the region, as it could drive traders away from vanity-centric territories or cause traders to turn to illiquid trading pairs.
Usman Ahmad, CEO of Zodia Markets, highlighted the significant impact of the decision, describing it as both “exclusive and disruptive” for EU-based clients. Usman noted:
I understand why this was done to some extent, but it is quite exclusive and quite limiting for EU customers themselves, as (USDT) is the most liquid stablecoin by a mile in the country.
Notably, the removal of Tether from EU exchanges has already caused changes in business models. According to Bloomberg, with fewer USDT trading pairs available, some exchanges are reporting an increase in fiat trading pairs as traders adapt.
Erald Ghoos, CEO of OKX Europe, noted that fiat currencies are increasingly being used for trading in the absence of Tether, a development that reflects changing market dynamics.
Europe lagging behind in the crypto race?
Although the aim of MiCA is to strengthen regulatory standards, critics have pointed out that this could actually harm the EU’s competitiveness as a crypto platform. Pascal St-Jean, CEO of crypto asset manager 3iQ Corp, said:
A large portion of cryptoassets trade in pairs against Tether’s USDT. So the cost for investors having to trade a USDT pair, just to purchase the same asset against another stablecoin, will cause disruption.
Bloomberg reported that the restrictions come as other regions, including North America, are seeing a surge in crypto activity. PitchBook data shows that venture capital investment in European crypto startups is on track to fall to a four-year low in 2024, compounding the region’s woes.
Meanwhile, the United States, on the other hand, now appears to be moving in a more crypto-friendly direction. President-elect Donald Trump’s administration has appointed several cryptocurrency advocates to key positions, signaling a potentially light-touch approach to regulation.
Featured image created with DALL-E, chart from TradingView
