Tether’s U.S. dollar stablecoin experienced its sharpest decline since the FTX collapse during the sluggish crypto market of 2022.
On-chain data revealed that Tether’s USDT lost approximately 1.2% of its market capitalization this week as the European Union’s digital asset regulations fully took effect on December 30.
The stablecoins market cap dropped to $137 billion, down from its December peak of $140 billion, sparking speculation about USDT’s future and potential volatility. Concerns emerged over whether Tether’s operator might exit the European Union due to the newly implemented laws.
Industry Response to Concerns
Social media speculation was met with pushback from industry leaders and analysts who highlighted USDT’s resilience outside the EU.
- Experts dismissed fears that the EU’s Markets in Crypto-Assets Regulation (MiCA) would disrupt USDT’s business.
- Karen Tang, head of APAC partnerships at Orderly Network, and social media analyst Axel Bitblaze emphasized USDT’s dominance in Asian and U.S. markets.
Bitblaze noted that approximately 80% of USDT’s trading volume occurs in Asia and the MICA deadline does not mean Europeans can’t hold USDT.
“There’s a lot of misinformation spreading about USDT being deemed illegal in the EU, so let’s clear that up first First of all, it will not be illegal to hold USDT in the EU
You can keep USDT in non-custodial wallets and even use it for trading on DEXs the restriction is that you cannot use USDT for trading on MiCA-compliant exchanges” Bitblaze stated
“USDT is the largest stablecoin, with a market cap of $138.5B and a daily trading volume of $44B As of today, 80% of USDT’s trading volume comes from Asia, so the EU delisting won’t have any severe impact”, Bitblaze added
Tang argued that MiCA regulations could hinder the EU itself, slowing digital asset innovation due to “overly complex regulations.”
Tether’s Strategy for MiCA Compliance
Speculation about USDT’s future in the EU gained momentum in late 2024 after Coinbase and several EU-based exchanges delisted USDT, citing MiCA compliance issues. While some stablecoin rules took effect in July, the full MiCA framework was implemented at the end of the year.
MiCA mandates stablecoin issuers to secure specific licenses for e-money tokens and asset-referenced tokens like USDT. Currently, Circle’s USDC remains the only major stablecoin issuer to obtain a MiCA license.
What to Know
- Tether has fought back to maintain a hold of Europe’s market by investing in EU-based companies such as StablR and Quantoz. Tether’s CEO, Paolo Ardoino, has repeatedly assured that the company has no plans to exit the EU. Although USDT is not tradable on MiCA-compliant exchanges, for now, traders can still use non-custodial wallets as a temporary workaround.
- Tether remains the largest stablecoin by market capitalization and market share.
