Source: Talking about Li and Outside
I remember mentioning the EU's MiCA (Market in Crypto-Assets Regulation) in an article earlier this year (January 3), as shown in the image below.
From a timeline perspective, the regulatory rules for stablecoin issuers under MiCA came into effect on June 30 and will be fully implemented by December 30. MiCA is the first complete regulatory framework from the EU for the crypto industry, especially putting forward clear requirements for the regulation of stablecoins.
In this context of increasingly stringent compliance requirements, it is foreseeable that competition in the European stablecoin market will undoubtedly intensify. From previous news, it seems that some crypto companies have also made corresponding preparations. For example, it is reported that unlicensed Tether has already invested in the Dutch company Quantoz and the European stablecoin provider StablR.
In addition, European countries seem to be continuously advancing regulatory measures for cryptocurrencies. For instance, the UK's FCA (Financial Conduct Authority) expressed hopes to launch a comprehensive regulatory framework for cryptocurrencies before 2026 (the holding of crypto assets in the UK has grown by 4% over the past two years, with about 7 million adults among the country's 68 million population holding crypto assets). The German parliament also passed the financial market digitization bill necessary for the full implementation of MiCA this month (December 21).
Continuing with Tether, according to reports from Bloomberg, to comply with MiCA regulations, several cryptocurrency exchanges within the EU have delisted Tether's USDT. Because so far, although Tether has made some preparations, they have not obtained the corresponding formal license. Meanwhile, Tether's main competitor, Circle, has obtained such a license and is currently the world's first stablecoin issuer compliant with MiCA. They have now issued USDC and EURC locally to European customers, effective from July 1.
Some partners might ask, if EU exchanges completely delist USDT, will USDT collapse like UST did?
Next, let's briefly discuss this issue.
I remember last year (2023), we published a detailed article on the development history of Tether (USDT) on our public account, but that article is no longer available. Those interested in Tether's history can search for it on Google.
In fact, regarding the MiCA introduced by the EU, the purpose of regulation is to better grasp the liquidity of cryptocurrencies and prevent money laundering and other criminal activities. We all know that cryptocurrencies like USDT are often used in such criminal activities. Moreover, for a long time, there have been constant doubts about USDT, including:
- Insufficient transparency and questionable security. For example, Tether has never undergone a real audit; although in 2021, Tether collaborated with BDO to release an 'audit report', it was not an official audit.
- Centralization risk and potential legal risks
However, issues of transparency and security have seemingly existed since the inception of USDT, and these problems do not require too much attention from ordinary retail investors. As mentioned in one of our previous articles: at least from our perspective, in the next 3–5 years, this field will still be dominated by USDT trading.
However, one point we need to pay attention to is that, compared to the long-standing issues of transparency and security, the loss of liquidity is currently the most serious problem that stablecoins like USDT may face. If USDT were to exit the EU market entirely due to non-compliance with MiCA, it would inevitably lead to liquidity loss.
However, those who understand Tether's development history should also know that they have already faced many crackdowns or fines from relevant institutions in the past, and they are still the largest stablecoin in the crypto field, with a market value of 138.57 billion USD. As shown in the image below.
Although they seem to be facing a new round of crackdowns from the EU, and many partners have been panic-exchanging their USDT for USDC in recent days, I believe this concern is somewhat excessive.
To put it bluntly, Tether's current size and status have actually made it a 'too big to fail' company. I believe that a EU regulation like MiCA cannot cause USDT to collapse. Just think about how many major players, institutions, and tier-one exchange funds (or reserves) are involved. If USDT were to collapse this month simply because of a EU regulation, it would mean that the entire crypto industry might face collapse, which the bosses above would definitely not want to see.
On the other hand, as we mentioned above, Tether has also attempted to bypass some regulations through investments. Therefore, in the short term, there is no need for panic. If you are still not at ease, you might consider splitting your stablecoin holdings into half USDT and half USDC.
In summary, in the face of the immense interests of the market and capital, sometimes, some regional regulations may not have any fatal impact on USDT in the short term. Currently, the only thing that could eliminate USDT is if it is gradually abandoned by liquidity, but this takes time. If this MiCA successfully leads to a complete exit of USDT from the European market, it would merely serve to accelerate that timeline (of course, we cannot rule out the possibility of USDT becoming fully compliant in the future).
From a longer-term perspective, comprehensive regulation of stablecoins is only a matter of time. For example, with Trump's possible return to power next year, the U.S. may also introduce some bills (or legal frameworks) regarding cryptocurrencies. For USDT, 2025 may pose greater challenges, but for the stablecoin industry, 2025 could be a new glorious year. Only with a clear legal framework for stablecoins can there be widespread interest and participation from institutions (like JPMorgan and other large institutions and traditional financial institutions), businesses, and consumers, which would have a tremendous impact.
The development of the stablecoin industry is not limited to the crypto field; it may also represent the continuation of the dollar's status in the future. Once stablecoins are finally pegged to fiat currencies (primarily referring to the dollar), the development of stablecoins will also mean an increase in global demand for dollars, which will be a huge game.
