Tether now appears to have been affected by the regulatory shake-up in Europe. In particular, with the EU’s new Markets for Crypto Assets (MiCA) regulations set to come into full force in member states by the end of the year, the cryptocurrency landscape is being reshaped.
With the aim of increasing oversight as well as eliminating illegal practices, MiCA requires the issuance of stablecoins traded on centralized exchanges by companies that have an e-money license. Several cryptocurrency exchanges operating in the European Union responded by delisting the world’s leading stablecoin, Tether’s USDT.
This development has increased concerns about liquidity and investor attractiveness due to the delisting of USDT.
Tether Delisted: Implications for EU Cryptocurrency Markets
USDT is a stablecoin and an essential part of the cryptocurrency ecosystem as it is an important tool for trading and settling cryptocurrency transactions.
Blocking access to Tether across the continent could be counterproductive to the region as it could push traders away from vanity-centric regions or cause traders to shift to illiquid trading pairs.
Othman Ahmed, CEO of Zodia Markets, highlighted the significant impact of the decision, describing it as “exclusionary and devastating” for EU-based clients. Othman noted:
I understand why this is done to some extent, but it is completely exclusionary and quite restrictive for EU clients themselves because (USDT) is the most liquid stablecoin nationwide.
Notably, the removal of Tether from EU exchanges has already caused shifts in trading patterns. According to Bloomberg, with fewer USDT trading pairs available, some exchanges have reported an increase in fiat trading pairs as traders adapt.
Erald Goss, 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 cryptocurrency race?
Although MiCA’s goal is to strengthen regulatory standards, critics have pointed out that it may actually weaken the EU’s competitiveness as a cryptocurrency hub. Pascal Saint-Jean, CEO of crypto asset manager 3iQ Corp, said:
A large percentage of crypto assets are traded in pairs against Tether’s USDT. So the cost to investors who have to trade outside of the USDT pair, just to buy the same asset that is traded against another stablecoin, will cause disruption.
Bloomberg reported that the restrictions come at a time when other regions, especially North America, are witnessing a wave of cryptocurrency activity. Venture capital investment in European cryptocurrency startups is on track to fall to a four-year low in 2024, adding to the region’s woes, PitchBook data shows.
Meanwhile, the United States, by contrast, 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-hearted approach to regulation.
Featured image created with DALL-E, chart from TradingView