Uphold, a New York-based crypto exchange, has announced the delisting of six stablecoins, including Tether (USDT), in anticipation of the upcoming Markets in Crypto Assets (MiCA) regulation in the European Union. The MiCA regulation, which fully comes into effect on June 30, 2024, requires all digital assets to comply with its extensive regulations, raising concerns about the future of USDT in the region.
Tim Wang, COO of Elixir, suggests that short-term effects may lead to market dislocation for liquidity and trading markets due to USDC and USDT dominance on centralized exchanges. He also notes that US dollar-backed stablecoins and assets remain the primary form of collateral in the crypto markets, as Euro stablecoins have not gained much adoption.
The new EU crypto laws impose stringent regulations on fiat-backed stablecoins and e-money tokens exceeding a specific adoption threshold. Key provisions of MiCA include a 1:1 backing of fiat-based stablecoins with liquid reserves, custodial separation of reserve assets, and a prohibition on algorithmic stablecoins.
Other major crypto exchanges such as Kraken, Binance, and OKX have also made changes to their stablecoin listing policies to ensure compliance and avoid regulatory issues. The upcoming MiCA regulations could set a precedent influencing crypto regulations in other regions, including the US. However, Wang believes that stablecoin regulation will be more complex due to the increasing political contention around "stablecoin hegemony".