Tether Faces Sharpest Decline in Two Years Amid MiCA Regulation Enforcement
Tether’s market capitalization has fallen by over 1% this week, marking its steepest weekly drop since the collapse of FTX in November 2022. The leading dollar-pegged stablecoin, USDT, saw its value dip to $137.24 billion, the largest decline in over two years. This drop follows a recent decision by several European Union (EU)-based exchanges, as well as Coinbase, to delist USDT due to the implementation of the EU’s Markets in Crypto-Assets (MiCA) regulations.
The MiCA regulations, which officially took effect on December 30, 2023, require issuers of stablecoins to obtain a MiCA license in order to offer or trade asset-referenced tokens (ARTs) or e-money tokens (EMTs) within the EU. USDT, which is an EMT referencing the U.S. dollar, falls under these rules. While EU-based traders can still hold USDT in non-custodial wallets, they are no longer able to trade it on centralized exchanges that comply with MiCA. This has contributed to the recent decline in Tether’s market value, which had previously hit a record high of $140.72 billion in mid-December.
Despite the regulatory challenges, concerns over the broader impact on the crypto market may be overstated. Karen Tang, Head of APAC Partnerships at Orderly Network, a Web3 liquidity platform, addressed these fears on social media, stating that the EU’s move to restrict access to USDT is unlikely to harm its dominance. “The EU isn’t the largest crypto market,” Tang said. “Most trading volume occurs in Asia and the U.S., so the delisting will primarily stunt the EU’s digital asset innovation, which is already hindered by excessive overregulation.”
Supporting this view, crypto analyst Bitblaze pointed out that Asia accounts for the majority of USDT’s trading volume, which makes the EU delisting less impactful. “USDT has a daily trading volume of $44 billion, with 80% of that coming from Asia,” Bitblaze noted. “The EU delisting won’t have a severe impact on its global position.”
In response to the regulatory changes, Tether has taken proactive steps to ensure compliance with MiCA. The company has invested in MiCA-compliant firms like StablR and Quantoz Payments, signaling its commitment to aligning with the new regulations and minimizing any potential market disruptions.
While the removal of USDT from certain exchanges may reduce its liquidity in the EU, Tether’s overall dominance in the global crypto market remains largely unaffected by this shift. As such, despite the ongoing volatility, USDT continues to play a central role in the broader crypto ecosystem.
