Tether (USDT), the world's leading stablecoin pegged to the US dollar, recorded the strongest weekly market value drop in two years, raising concerns about volatility.
The market capitalization of USDT has decreased by more than 1% to $137.24 billion this week, the largest decline since the FTX exchange collapse in the second week of November 2022. Previously, the market cap had reached a record $140.72 billion in mid-December.
Market capitalization of USDT | Source: CoinMarketCap
The decline figures follow the decision of several exchanges based in the European Union (EU) and Coinbase to delist USDT due to compliance issues with the EU's Markets in Crypto-Assets (MiCA) regulation, which takes full effect on December 30, although the stablecoin rules came into effect six months earlier.
The regulation requires issuers to have a MiCA license to publicly offer or trade asset-referenced tokens (ART) or electronic money tokens (EMT) within this trading block. ART is cryptocurrency that tends to maintain stable value by referencing another asset such as gold, cryptocurrency, or a combination of both, including one or more official currencies. EMT refers to a single national currency, like USDT.
Currently, traders in the EU can still hold USDT in non-custodial wallets, but cannot trade on MiCA-compliant centralized exchanges.
USDT is often seen as the gateway to the crypto market, as it is widely used by investors to fund spot coin purchases and derivative trading. Therefore, the delisting and decrease in market value have raised speculation about the risk of a broader decline across the crypto market.
However, according to Karen Tang – Head of APAC Partnerships at the liquidity layer Orderly Network, noted in a post on X, these concerns may be unfounded and the negative impact is limited to the euro area.
“Access to USDT is restricted in the EU due to MiCa regulations, which will not harm USDT's dominance. The EU is not the largest crypto market. Most trading volume occurs in Asia and the United States. All of this will hinder the EU's digital asset innovation, which has already been slow due to overly complex regulatory management.”
Bitblaze analysts stated that Asia accounts for the majority of USDT volume, so the delisting due to MiCA in Europe will not have much impact.
“USDT is the largest stablecoin, with a market cap of $138.5 billion and a daily trading volume of $44 billion. As of today, 80% of USDT trading volume comes from Asia, so delisting in the EU will not cause any serious impact,” Bitblaze noted on X.
Tether has invested in MiCA-compliant companies such as StablR and Quantoz Payments to ensure regulatory compliance.
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