Beware of USDT

Amid a change in the regulatory factors, Tether, despite being the most widely used stablecoin, is facing growing concerns, especially in the European Union (EU).

In March 2024, crypto exchange OKX announced it would cease support for USDT trading pairs for users in the European Union and European Economic Area (EEA).

OKX stated that this move was to focus on euro-denominated liquidity. While USDT remains available for deposit, withdrawal, and over-the-counter (OTC) trading, it is no longer available for direct trading against crypto assets other than USDC and the euro​.

This decision aligns with the EU’s new regulatory framework, known as the Markets in Crypto-Assets (MiCA) regulation, set to come into full force by the end of 2024.

MiCA requires stablecoin issuers to be regulated as electronic money institutions, a classification that many stablecoins currently offered in Europe do not meet.

Meanwhile, on June 18, cryptocurrency exchange Uphold notified its European users that it would delist six popular stablecoins, including USDT, starting July 1.

Uphold cited compliance with MiCA as the reason for this change. Users were instructed to convert their holdings into other cryptocurrencies before the deadline, after which the exchange would automatically convert the stablecoins into USDC​​.

Other major exchanges, such as Binance and Kraken, have also begun reviewing their stablecoin policies to comply with the new regulations.

Binance, for instance, has categorized its stablecoins into “regulated” and “unauthorized” under MiCA but has yet to finalize which stablecoins will continue to be supported.

Tether’s removal from trading pairs in the EU raises questions about its future as well as its legitimacy as a stablecoin in the region.

Could USDT collapse?

A look at the TerraUSD (UST) collapse offers a historical tale. TerraUSD was an algorithmic stablecoin designed to maintain its peg to the US dollar through a combination of algorithms and incentives involving its sister cryptocurrency, Luna..#usdtstory #USDT。