Stablecoin leader Tether has seen its market value decline amid new European Union cryptocurrency rules.
The company’s USDT just experienced its biggest weekly decline in two years, Coindesk reported Thursday (Jan. 2), raising concerns about market volatility.
USDT’s market capitalization fell more than 1% to $137.24 billion this week, the biggest drop since the FTX stock market crash in November 2022, the report said, citing TradingView data. USDT had reached a record high of $140.72 billion in mid-December.
According to the report, this drop comes after several EU-based exchanges and Coinbase removed USDT due to compliance concerns with the European Markets in Crypto-Assets (MiCA) regulation which came into full force on December 30 (the current law comes into force in six months). There is).
The regulation stipulates that issuers must have a MiCA license to publicly offer or trade certain tokens within the EU. Block-based traders can still hold USDT in non-custodial wallets, but cannot trade them on centralized MiCA-compliant exchanges.
CoinDesk notes that USDT is a “gateway” to the crypto market, so delistings and falling market value have led to speculation on social media about a broader decline in the crypto market.
These concerns may be unfounded, however, and the negative impact may be limited to the EU, wrote Karen Tang, head of APAC partnerships at Orderly Network, a permissionless Web3 liquidity layer, in an article on X.
Tether’s restrictions in the EU “due to MiCa regulations will not harm USDT’s dominance,” Tang wrote. “The EU is not the largest crypto market. Most cryptocurrency trading volumes take place in Asia and the United States. All of this will have the effect of stunting digital asset innovation in the EU, which is already slow due to excessive and convoluted regulation. If I could short the EU, I would…”
As PYMNTS wrote last month, Tether responded to MiCA by pivoting its European strategy to its Hadron platform, which will support stablecoins from other MiCA-compliant entities.
“As regulatory frameworks solidify in major jurisdictions, the actions of issuers like Tether highlight a potential emerging divide within the sector – one that could reshape the stablecoin landscape into two distinct tiers,” it says. this report.
“Stablecoins such as Tether’s USDT, while widely used, face ongoing questions around transparency and regulatory compliance. By focusing on platforms like Hadron, Tether could position itself to serve a different market – one less reliant on strict oversight and more aligned with the philosophy of decentralized finance.
