The European cryptocurrency market is set for a major change as the Market in Crypto-Assets Regulation (MICAr) takes effect on December 30, 2024.

The delisting of Tether's USDT from most centralized exchanges in Europe is one of the most significant changes that has caused fear, uncertainty, and doubt (FUD) in the market. Here’s what it means for cryptocurrency users, businesses, and the future of digital assets.

MICAr stands for the Market in Crypto-Assets Regulation. This comprehensive regulatory framework sets licensing requirements for cryptocurrency businesses in the European Union (EU), including "transitional rules" that facilitate compliance across EU member states.

MICAr essentially creates a transparent environment for cryptocurrency activities by requiring Know Your Customer (KYC) processes for cryptocurrency transactions and wallets. While supporters view this as a step towards the legitimacy of the market, critics argue that it may stifle innovation and invade privacy. MICAr is also expected to impact global cryptocurrency regulation, with the United States and other countries likely to adopt similar rules in the near future.

What changes will take place within the scope of MICAr?

Travel Rule

The Travel Rule will require cryptocurrency businesses operating under EU licenses to collect and share the identities of both senders and receivers for all transactions, regardless of their size. This is the:

  • Exchange trading: Exchanges will share users' personal data during transfers.

  • Hot and cold wallets: Even personal wallets must be linked to verified identities, allowing authorities and exchanges to track all transactions.

Critics argue that such extensive data collection increases the risk of privacy violations and data leaks.

Delisting Tether (USDT)

One of the most immediate impacts of MICAr is the delisting of USDT from Tether, the largest stablecoin in the world by market capitalization. USDT will no longer be available on most centralized exchanges in Europe starting December 30.

While USDC (USD Coin) is considered compliant and will continue to be used, the loss of USDT could disrupt trading pairs and liquidity. Many other stablecoins may follow suit, potentially limiting options for users in the EU.

What does this mean for users?

  • Transferring money from this exchange to another: Personal data will now accompany every transaction. This lack of anonymity raises concerns about where personal information might go and how it will be processed securely.

  • Hot and cold wallets: Linking wallets to identities undermines the privacy that cryptocurrency wallets typically provide. Even offline wallets that do not provide a direct route for fiat money will face KYC requirements.

Supporters of MICAr argue that stricter regulations will combat criminal activities such as money laundering and tax evasion. However, studies show that personal wallets do not significantly contribute to these risks as they are not connected to fiat currency inflows and outflows. Critics argue that these measures disproportionately affect privacy-conscious users and set a concerning precedent for global cryptocurrency governance.