Emily Walker
Tether is now facing challenges due to new regulatory changes in Europe. The European Union’s Markets in Crypto-Assets (MiCA) regulations are set to be fully implemented by year-end, fundamentally altering the crypto environment.
The MiCA regulations aim to enhance oversight and eliminate illicit activities, mandating that stablecoins on centralized exchanges must be issued by companies holding an e-money license. Consequently, numerous crypto exchanges in the EU have started removing Tether’s USDT from their platforms.
This situation has raised concerns regarding liquidity and the attractiveness of the investment landscape due to the withdrawal of USDT.
Impacts of USDT Withdrawal on EU Crypto Markets
As a major stablecoin, USDT plays a vital role in the cryptocurrency market, facilitating transactions and trading.
Removing Tether from access across Europe might have negative repercussions, potentially driving traders towards less desirable markets or encouraging them to engage in less liquid trading options.
Usman Ahmad, CEO of Zodia Markets, commented on the substantial repercussions of this decision, labeling it as both “exclusionary and disruptive” for clients in the EU. He remarked:
I understand the reasoning behind this decision to an extent, but it greatly limits EU clients since [USDT] is by far the most liquid stablecoin available.
The absence of Tether on EU exchanges has already led to changes in trading behavior. Bloomberg reports that with a decline in USDT trading pairs, certain exchanges are witnessing a rise in fiat trading pairs as users adapt.
Erald Ghoos, CEO of OKX Europe, indicated that traders are increasingly resorting to fiat currencies in the wake of Tether’s removal, highlighting the evolving market conditions.
Is Europe Lagging in the Crypto Scene?
While MiCA aims to strengthen regulatory frameworks, critics argue it could hinder the EU’s status as a competitive crypto hub. Pascal St-Jean, CEO of 3iQ Corp, stated:
A significant portion of crypto assets are traded against Tether’s USDT. Consequently, the burden on investors who must switch from a USDT pair just to purchase the same asset via another stablecoin will create disruptions.
According to Bloomberg, these restrictions come at a time when other areas, particularly North America, are witnessing an uptick in crypto activities. PitchBook’s data indicates that venture capital funding for European crypto startups is projected to hit a four-year low in 2024, exacerbating the region’s challenges.
In contrast, the U.S. appears to be steering toward a more accommodating stance on crypto regulations. The administration of President-elect Donald Trump has brought several cryptocurrency advocates into key roles, suggesting a potentially lenient regulatory approach.
Image generated by DALL-E; Chart sourced from TradingView.