New European Union crypto regulations are changing the stablecoin market, and Tether’s delisting of USDT could cause a crypto investor exodus, Bloomberg reports. The United States, under President-elect Donald Trump, is expected to take a more tolerant stance toward cryptocurrencies. However, Europe risks falling behind in the race for dominance in the digital asset market.
The EU’s Markets in Crypto Assets (MiCA) regime, which is set to come into effect at the end of 2024, requires stablecoins listed on centralized exchanges to be issued by entities holding an e-money license. To comply with this requirement, several EU exchanges have already delisted Tether’s USDT, the world’s most popular stablecoin. The token is set to be removed from regulated platforms by December 30 if Tether fails to obtain the necessary license.
While the new rules are intended to strengthen the fight against money laundering and other illegal activities, cryptocurrency company executives warn that the introduction of MiCA could drain market liquidity and hinder the EU's competitiveness in this market.
The absence of Tether is expected to disrupt crypto trading in Europe, as most crypto assets in the world trade in USDT. Alternative stablecoins, such as Circle’s USDC, are less common, and fiat trading pairs are just beginning to gain traction on European exchanges.
“The removal of Tether will significantly reduce liquidity for many traders,” said Pascal Saint-Jean, CEO of crypto asset management firm 3iQ Corp. “The costs to investors who will be forced to switch from USDT to another stablecoin will lead to disruptions.”
The tightening of cryptocurrency regulation in the EU stands in stark contrast to developments in the United States. Trump’s election sparked optimism about a more relaxed regulatory approach, boosting investor confidence. Bitcoin recently topped $100,000 for the first time, and smaller cryptocurrencies have rallied on expectations of less government intervention.
Trump has appointed several digital asset advocates to key positions, including Howard Lutnick, CEO of Cantor Fitzgerald, to be commerce secretary. Lutnick’s firm holds $85 billion in Tether Treasury notes, signaling a potential policy shift favorable to the crypto industry.
While the ECB reports that the share of crypto in the eurozone has more than doubled to 9% since 2022, broader indicators suggest a decline in enthusiasm. Venture capital investment in European crypto startups could hit a four-year low in 2024, while in North America it is on the rise.
Under MiCA, the regulator also requires issuers to hold reserves in independent banks, monitor transactions for payment purposes, and comply with transparency requirements. Critics argue that these measures alone may not deter illegal activity, as their implementation also depends on local authorities improving their monitoring capabilities.
The removal of Tether and the EU’s restrictive regulatory approach risk making Europe less attractive to crypto investors. Meanwhile, the US is poised to take advantage of Trump’s pro-cryptocurrency policies, potentially becoming a hub for digital asset innovation.