European MiCA legislation will come into force on December 30! Could Tether face complete delisting from EU exchanges?

Source: Parler de Li and Parler de l’autre

Recall that in an article from January 3, we discussed the EU’s “Regulation of Markets in Crypto-Assets” (MiCA), as shown in the image below.

According to the schedule, the regulatory rules for stablecoin issuers under MiCA came into effect on June 30 and will be fully implemented on December 30. MiCA is the EU’s first comprehensive regulatory framework for the crypto industry, including setting clear requirements for the regulation of stablecoins.

Against this backdrop of increasingly strict compliance requirements, it is foreseeable that competition in the European stablecoin market will inevitably intensify. From previous reports, it seems that some crypto companies have also made corresponding preparations. For example, unlicensed Tether reportedly invested in Dutch company Quantoz and European stablecoin provider StablR.

Additionally, European countries also appear to be making continuous progress in their regulatory measures regarding cryptocurrencies. For example, the UK’s Financial Conduct Authority (FCA) has expressed a desire to launch a comprehensive regulatory framework for cryptocurrencies by 2026 (crypto asset holdings in the UK increased by 4% in over the past two years, with approximately 7 million adults). holding crypto assets among the country’s 68 million residents). The German parliament also passed this month (December 21) the “Digitalization of Financial Markets Act,” necessary for the full implementation of crypto MiCA.

Coming back to Tether, according to Bloomberg reports, in order to comply with MiCA regulations, several crypto exchanges within the EU have delisted USDT from Tether, because until now although Tether has made some preparations, he did not obtain the corresponding formal licenses. Meanwhile, Tether’s main competitor, Circle, has obtained such licenses and is currently the world’s first MiCA-compliant stablecoin issuer. They have now issued USDC and EURC locally to European customers, effective July 1st.

Therefore, some friends might wonder if EU exchanges completely delist USDT, will USDT collapse like UST did back then?

Next, let’s briefly discuss this issue.

I remember last year (2023) we published a detailed article about the development history of Tether (USDT) on our public account, but this article is no longer available. Friends interested in the history of Tether can Google it.

Indeed, regarding the MiCA launched by the EU, the objective of the regulation is to better understand the liquidity of cryptocurrencies and to prevent criminal activities such as money laundering. We all know that cryptocurrencies like USDT are often used in such criminal activities. Additionally, there have long been doubts about USDT, including:

• Insufficient transparency and questionable security. For example, it has never been subject to a real audit. Although in 2021, Tether collaborated with BDO to release an “audit report,” it was not a formal audit.

• Centralization risks and potential legal risks.

However, transparency and security issues seem to exist since the birth of USDT. These issues do not require too much concern from ordinary retail investors. As we mentioned in a previous article: at least from our perspective, this area will still be dominated by USDT trading in the next 3-5 years.

But we should pay attention to the fact that, compared to ongoing transparency and security issues, for stablecoins like USDT, the potential loss of liquidity is currently the most serious problem they may face. If USDT leaves the EU market due to non-compliance with MiCA, it will inevitably lead to a loss of liquidity.

However, those who understand the history of Tether’s development should also know that they have already suffered numerous strikes or fines from relevant institutions in the past, but they remain the largest stablecoin in the crypto space , with a market capitalization of $138.57 billion. As shown in the picture below.

Although they now seem to be facing a new round of strikes from the EU, many friends have panicked by swapping all their USDT for USDC in recent days, but I think this worry is somewhat excessive.

To put it bluntly, Tether’s current size and status has essentially made it a “too big to fail” company. I think that regulation like EU’s MiCA cannot cause the collapse of USDT. Consider how much capital (or reserves) from major tier one players, institutions and exchanges is involved. If USDT were to collapse this month solely because of this European regulation, it would mean that the entire crypto industry could face a collapse, which is something these bosses definitely don’t want to see.

On the other hand, as we already mentioned, Tether is also trying to circumvent certain regulations through investments. There is therefore no need to panic in the short term. If you’re still not comfortable, you might consider splitting your stablecoin holdings into half USDT and half USDC.

In summary, in the face of immense market and capital interests, some regional regulations may sometimes not have a fatal impact on USDT in the short term. Currently, it appears that the only thing that could push USDT lower is its gradual abandonment by liquidity, but that takes time. If this MiCA results in the complete exit of USDT from the European market, it would only accelerate this timeline (of course, we cannot rule out the possibility that USDT becomes fully compliant in the future).

From a longer-term perspective, comprehensive regulation of stablecoins is only a matter of time. For example, with Trump potentially returning to power next year, the United States could also introduce laws (or legal frameworks) regarding cryptocurrencies. For USDT, 2025 could pose greater challenges, but for the stablecoin industry, 2025 could become a new glorious year. Only with a clear legal framework for stablecoins can we generate interest and participation from large-scale institutions (such as JPMorgan and other large traditional financial institutions and entities), corporations and consumers, which will have a huge impact.

The development of the stablecoin industry is not limited to the crypto field; it could also represent the continued status of the dollar in the future. Once stablecoins are fully pegged to fiat currencies (mainly referring to the dollar), the development of stablecoins will also lead to an increase in global demand for the dollar, which will be a massive play.