Tether is again supporting the crypto market after injecting a total of 1B of tokens in the past month. The new USDT was also added to other stablecoins that support niche DeFi protocols.
The total supply of USDT expanded to 112.49B tokens, with their value supported by US T-bills.
The current circulation of $USDT is 112.5B $USDT, of which 97.4% is circulating on #Ethereum and #TronNetwork.58.6B $USDT(52.1%) on #TronNetwork and 50.96B $USDT(45.3%) on #Ethereum.https://t.co/6pVfClZMQX pic.twitter.com/2FywGRA2wT
— Lookonchain (@lookonchain) June 11, 2024
USDT is ubiquitous, supplying both centralized exchanges and emerging decentralized hubs. The token grows on the Telegram network and may also be used to pay transaction fees. Tether has launched several native versions on selected chains, but USDT has been bridged and held from the main Ethereum supply for other networks.
Read: Transak now supports USDT on TON
The current rise in USDT liquidity is slower than in previous bull market periods. The previous bull markets also helped Tether become a more reliable issuer, though still raising questions about how much more USDT can be printed. At the same time, Tether has reported record earnings and has padded its balance sheet during the last few months of the bull market.
#Tether's reported $4.52 billion Q1 profit, largely from speculative asset gains and interest on massive Treasury holdings, raises transparency concerns about the stablecoin issuer's operations, reserves quality, and alignment with its intended purpose as regulators scrutinize… pic.twitter.com/VPU2Jophp1
— Mr. Man (@MrManXRP) May 28, 2024
Over time, USDT has also reached the wallets of an estimated 50M holders, one of the highest distributions of crypto tokens. Through almost all of Tether’s history, the company has faced criticism on its asset backing, and the current rise in supply is no exception. People closely watch the supply of USDT for the potential of bubbles and another fallout because of inflated token values.
Can USDT Face Regulatory Blocks in the EU?
Crypto traders and potential buyers from the EU can face restrictions in their use of certain stablecoins. The definition of “regulated stablecoins” based on the new Euro economic area regulations may restrict the usage of USDT. As an alternative, traders, stakers or buyers may resort to USDC, a transparent, cash-backed stablecoin.
For Binance users from the European Economic Area, USDT will be a sell-only asset. The Markets in Crypto Regulation (MiCA) framework will start coming into force from June 30, affecting the stablecoin market.
Binance also announced that it will aim to recover some of its products, by offering MiCA-compliant alternatives and regulated sources of liquidity. For now, Binance has not referenced another stablecoin other than USDT. The new restrictions will not affect users with addresses outside the European Economic Area.
The current standards for stablecoins are yet to be specified by the European Banking Authority (EBA), with a deadline on June 30. The new regulations does not mention Tether’s USDT explicitly, and puts stablecoins in the category of “asset-referenced tokens”.
The big problem for USDT and other assets may come precisely because of the technical requirements for cash or other reserves, as well as their liquidity and immediate availability.
The other significant requirement is that all issuers of asset-referenced tokens will need to have an office within the European Economic Area, while also keeping regulators informed when generating new digital tokens. Another big change coming is the oversight of the entire crypto sector.
Also read: How USDT gained popularity despite controversies in the stablecoin space
EU authorities and banking regulators will develop an annual report on the number of issuers of tokens, e-money, or asset-referenced tokens. The EU will also attempt to oversee EU-based users who own crypto assets issued by entities outside the EU.
So far, EU regulation has helped more to facilitate crypto trading, rather than ban it outright. The new regulations are seen as a way to grant legitimacy to crypto assets, especially stablecoins. USDT may be delisted and have trading pairs removed if Tether reserve balance does not comply with new EU regulations.
In the EU, an estimated 31M users hold cryptocurrency. Ownership and usage levels are much lower compared to Asia. Coinbase leads the way in trading USDT on US-based exchanges. Kraken is the only EU-based market at the top, carrying 116M in USDT trades. The Kraken exchange is also an important broker for swapping into fiat currencies, and a freeze on USDT would disrupt this opportunity for European traders.
Cryptopolitan reporting by Hristina Vasileva