MiCA in Effect in EU, but Tether’s USDT Future Uncertain?

The EU’s Markets in Crypto-Assets (MiCA) Act has officially come into effect, yet Tether’s USDT has not received compliance certification. This has raised concerns about its future in the EU market. MiCA imposes strict requirements on stablecoin issuers, and major players like Tether face capital reserve and liquidity mandates that could lead to their withdrawal from the region.

Adding to the uncertainty, regulators have not provided clarity on whether USDT meets the new norms. This lack of guidance leaves its status within the EU’s single market in limbo.

MiCA in Effect, But Tether’s USDT on Tenterhooks?

Tether’s vast market capitalization and global popularity could either make or mar its position in Europe. Under MiCA, small stablecoin issuers must keep 30% of their reserves in low-risk commercial banks within the EU, while larger players like Tether must maintain 60% or more. These reserve and liquidity directives could prove challenging for Tether, as its large capitalization of $137.55 billion and widespread adoption make compliance economically unfeasible without potentially disrupting the broader crypto ecosystem.

WeFi’s Head of Growth, Agne Linge, commented that while these mandates may pose significant challenges, Tether’s global prominence and substantial market capitalization make it less likely to face an immediate financial shock if it exits the EU.

Meanwhile, some exchanges within the EU have started adjusting to the new regulations. Coinbase Europe, for instance, has removed stablecoins such as USDT from its platform. Analysts predict that MiCA could prompt both small and large companies to exit the EU market, foster market integration, and increase operational and investment costs.

Despite potential regional disruptions, Tether’s operations remain strong. “Tether is on track to end the year with $10 billion in earnings,” Linge stated, highlighting the company’s high-profit margins. Additionally, Tether has optimized its substantial cash reserves to diversify its product offerings and investments, reducing risks associated with its stablecoin portfolio.

In conclusion, it remains to be seen whether Tether will choose to exit the European market or comply with the new rules, especially after Coinbase delisted USDT and other stablecoins, while Binance and other crypto exchanges decided to retain their stablecoin offerings.

Also Read: Tether Mints $1 Billion USDT, $20 Billion Total Since Nov 6