USDT is Europe's queen stablecoin, but that's about to change
According to data from Kaiko Research, USDT remains a crucial trading asset for European users.
USDT Tether (USDT), the largest stablecoin on the market by trading volume, remains the king in Europe, a region where it continues to dominate the space even with growing competition. But that may change in the coming weeks.
According to a report by market analysis firm Kaiko Research, USDT is clearly a “crucial trading asset” for European users. This, considering that in Europe, stablecoins have almost 90% dominance in all cryptocurrency transactions.
According to data from that analysis firm, the average weekly volume of dollar-based stablecoins in Europe amounted to $270 billion, a figure 70 times higher than that of their euro-backed counterparts.
However, the market share of euro-backed stablecoins has experienced constant growth since 2020, currently reaching an all-time high of 1.1%, according to data from that analysis firm.
Now, USDT's hegemony is about to be challenged by impending regulation in Europe, recalls Kaiko Research. This could even lead to the removal of USDT from major European exchanges, as well as an increase in the adoption of regulated stablecoins backed by euros.
It must be remembered that as of June 30, the rules of the MiCA Law for stablecoins will come into force. This implies the application of a series of measures that distance USDT from the eurozone, as has been warned in the past by the issuing company of that digital asset.
Paolo Ardoino, CEO of Tether Limited, recently warned that the risk of not having access to USDT in Europe “is already real.” This is because an agreement has not been reached with European regulators and the MiCA regulations will be applied shortly.
According to Ardoino, Tether has actively participated in consultations on regulatory technical standards over the past few months “and remains concerned that MiCA contains several problematic requirements.”
Among these requirements, for example, is the obligation for stablecoin issuers to register with the European authorities to obtain a license. In addition, these companies are required to maintain 60% of reserves in bank deposits.
Something that Ardoino does not agree with, who predicts that USDT will leave the European Union due to its refusal to give in to the demands of the bloc's authorities.
The departure of USDT has already begun to occur, remembering that Binance announced plans to restrict non-MiCA compliant stablecoins, including USDT. While Kraken, which is another major exchange in use in Europe, is actively studying whether to remove USDT from its offering for European users.
Change in the stablecoin market in Europe
Either way, regulatory uncertainty, along with the problems Tether Limited has had in the past with regulators, could prompt European traders to opt for more regulated stablecoins, such as USD Coin, which is issued by Circle.
In fact, this is the stable cryptocurrency that has all the numbers at stake to continue operating after the MiCA regulations for stablecoins come into effect.
This is because Circle already has the license required by MiCA to operate and has become one of the companies in the cryptocurrency sector where regulatory compliance is most prevalent.
In addition to other more regulated stablecoins, European users could switch from USDT to euro-backed stablecoins, which have seen steady growth so far this year.
These coins could also challenge the hegemony of USDT in Europe and become the new value reference in the cryptocurrency market on the old continent, according to Kaiko Research estimates.
Cryptocurrency trading in Europe has been growing steadily, especially in euro-backed stablecoins. In fact, transactions using euro stablecoins have increased significantly since 2020.
Exchanges such as Binance and Kraken have seen an increase in trading volume in USDT versus EUR trading pairs, suggesting that European traders are increasingly interested in these stablecoins, as noted by Kaiko analysts.
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