Tether Delists from European Exchanges as MiCA Regulations Approach
Markets in Crypto Assets (MiCA) regulations in the European Union will take effect by the end of the year, potentially disadvantaging Europe as pro-crypto President-elect Donald Trump assumes office in January.
In anticipation of MiCA, several European crypto exchanges have delisted Tether's USDT stablecoin. Consequently, investors are increasingly using the Euro for digital asset transactions while new investors seek to enter the market.
MiCA aims to enhance regulatory oversight of crypto flows and combat illicit activities like money laundering. However, industry leaders warn that these regulations may reduce market volatility without achieving their intended goals, potentially making Europe less attractive for global investors. Usman Ahmad, CEO of Zodia Markets Holdings Ltd, stated:
“I understand why it’s been done to a certain extent, but it’s quite exclusionary and quite limiting for EU clients themselves because [USDT] is the most liquid stablecoin by a country mile.”
The stablecoin market is rapidly expanding, with projections suggesting it could reach multi-trillion dollar valuations by 2030. Nonetheless, regulators express concerns about this growth; recently, UK police dismantled Russian networks transferring billions utilizing USDT.
MiCA Faces Challenges in Illicit Stablecoin Activity Tracking
To tighten stablecoin oversight, MiCA mandates that all stablecoins on centralized exchanges be issued by entities holding an e-money license. These issuers must back two-thirds of their stablecoin reserves with an independent bank and monitor payment transactions.
Tether's main competitor, Circle, issuer of USDC stablecoin, obtained its e-money license in July, while Tether has not pursued this license. Without it, European exchanges are required to delist Tether by December 30. In response, Tether invested in European stablecoin issuer StablR, which has achieved MiCA compliance.
Despite MiCA's framework, experts assert that local authorities require significant upgrades to surveillance tools to effectively track illicit transactions. Isabella Chase from TRM Labs emphasized that monitoring effectiveness depends more on technological capabilities than on MiCA itself.
Europe Can Fall Behind America in Crypto Race
As regulatory pressures increase, the crypto landscape is rapidly evolving. Under Trump's leadership, changes in regulatory policies toward digital assets are anticipated, with several advocates appointed to key positions, including Howard Lutnick, CEO of Cantor Fitzgerald LP, nominated to oversee the Department of Commerce. Lutnick's firm manages Tether's $85 billion in Treasury bills.
Conversely, Europe risks lagging in the crypto sector, with venture capital investment in European crypto startups expected to decline to a four-year low in 2024. However, positive trends include a report from the European Central Bank indicating that crypto ownership in the euro area has more than doubled since 2022, reaching 9%.