The EU's comprehensive implementation of cryptocurrency asset regulations by the end of the year is reshaping the market for a very critical stablecoin—USDT issued by Tether—potentially weakening its appeal to global investors. The withdrawal of USDT from the European market coincides with the return of cryptocurrency's 'strongest supporter', Donald Trump, to the White House in January next year, raising concerns among investment firms that Tether, the core force behind stablecoins, and the entire stablecoin market may perfectly miss the new 'cryptocurrency investment wave' brought by Trump's return.
It is understood that several large cryptocurrency exchanges operating in the EU have delisted the dominant stablecoin—USDT issued by Tether Holdings Ltd.—to comply with the EU's strict crypto asset market regulations. This move is causing a chain reaction in the market for these types of instruments, with new stablecoin issuers seeking to fill the void, while investors, under EU regulatory pressure, default to using the recently depreciated euro for cryptocurrency trading.
After the notorious 'stablecoin crash event' triggered by the stablecoin TerraUSD in 2022 severely impacted market sentiment, the overall market value of stablecoins has slowly begun to recover and recently surged to new heights. According to DeFiLlama statistics, as of November, the global market capitalization of stablecoins has significantly increased by 46% this year, surpassing $190 billion, breaking the historical record set during the Terra era to reach an all-time high.
The core force of stablecoins, USDT, is forced to withdraw from Europe, coinciding with the total market value of stablecoins reaching the aforementioned 'milestone moment'. The withdrawal of USDT from the European market may severely impact investors' sentiment toward the entire stablecoin market. Tether has issued the world's largest stablecoin, USDT, with a circulation soaring to nearly $150 billion, accounting for about 70% of the total stablecoin market. The company hopes to expand the use of USDT by venturing into more new areas, including commodity trading. It is reported that the company recently announced funding support for its first crude oil transaction in the Middle East.
Stablecoins dominate absolutely—the scale of Tether's USDT far exceeds any other stablecoin in the cryptocurrency system.
Stablecoins are also a type of cryptocurrency designed to maintain a consistent price with fiat currencies (usually the dollar) over the long term. In the past period, their main use has been as a channel for traders to transfer funds in and out of other cryptocurrencies. However, more and more investors are optimistically believing that as Trump, who strongly supports the development of cryptocurrencies, returns to the White House, stablecoins may play a more significant role in the global business and trade systems, especially as a stable payment tool for cross-border payments.
Stablecoins may perfectly miss the cryptocurrency frenzy brought by the 'Trump inauguration moment'.
According to the EU's latest statement, the new regulatory rules concerning cryptocurrencies aim to provide regulators with deeper insights into cryptocurrency liquidity and help prevent crimes such as money laundering. Blockchain forensic experts state that crimes like money laundering often utilize USDT. However, executives in the cryptocurrency industry collectively warn that the MiCA (Markets in Crypto-Assets) regulation may ultimately withdraw stablecoins, or even the entire liquidity of the cryptocurrency market, failing to achieve the EU's objectives and weakening the EU's attractiveness to digital asset investors at critical moments.
'I understand why this is done to some extent, but it is quite exclusive and restrictive for EU customers themselves, as [USDT] is currently the most liquid stablecoin,' said Usman Ahmad, CEO of Zodia Markets Holdings Ltd., a crypto trading company supported by Standard Chartered Bank.
From the perspective of some cryptocurrency investment firms, the largest stablecoin, USDT, and the entire stablecoin market may miss the new 'cryptocurrency investment wave' brought by Trump's return to the White House, and the stablecoin market may not replicate the frenzied scene of November that 'broke the market value peak of the Terra era'.
Wall Street has begun to envision a new wave of investment after Trump officially takes office. A team of analysts from investment firm Bernstein recently released a forecast stating that as Trump may increase support for the development of cryptocurrencies after taking office, Bitcoin's price could reach $200,000 by the end of 2025. 'We expect that Bitcoin will ultimately replace gold in the next decade, becoming the primary 'store of value asset' of the new era and a permanent component of investment firms' multi-asset allocations and standard corporate financial management.'
Bernstein's latest Bitcoin price prediction aligns with that of Standard Chartered Bank, whose global head of digital asset research, Geoff Kendrick, accurately predicted that Bitcoin would reach $100,000 this year and recently stated that by the end of 2025, Bitcoin's price will reach $200,000.
Stablecoins are typically pegged to mainstream assets like the dollar or euro, making them crucial tools for cryptocurrency traders to enter and exit positions or transfer funds between platforms. For major companies seeking to transfer funds across borders and facilitate faster, cheaper digital payments, as well as for investors looking to use blockchain technology to trade and settle traditional assets like bonds, stablecoins have become increasingly useful.
With this growth, Europe is increasingly concerned about the use of stablecoins for illegal purposes. Earlier this month, British police stated that they shut down networks that transferred billions of dollars for oligarchs, street gangs, and spies, which utilized USDT. The UK's National Crime Agency indicated that these networks exploited USDT.
At that time, Tether stated, 'We strongly condemn the illegal use of stablecoins and are fully committed to combating illegal activities.'
MiCA's guardrails
As part of efforts to strengthen regulation of asset classes, MiCA requires that all stablecoins listed on centralized exchanges must be issued by entities holding electronic money licenses. Issuers must keep two-thirds of their token reserves in independent European banks and monitor all transactions used for payment purposes.
Circle Internet Financial Ltd., Tether's main competitor, obtained such licenses in July. Tether has not yet obtained a license, although it does not rule out attempting to do so in the future. Unless Tether manages to obtain a license in the EU, regulated exchanges must delist USDT by December 30.
Tether's management declined to comment on its electronic currency license plans.
Isabella Chase, senior policy advisor at blockchain analytics firm TRM Labs, stated that even with MiCA's guardrails in place, local authorities across Europe still need to invest in upgrading their cryptocurrency or stablecoin trading monitoring tools to track and prevent illegal trading—and this is unlikely to be achieved in the short term. 'Visibility does not come from MiCA, but from the tools they use,' she said.
A report released by TRM Labs in March stated that in 2023, USDT was the most frequently used stablecoin for criminal activities such as terrorist financing. The report specifically pointed out that using USDT on the Tron blockchain is the preferred method for criminals. Months after the report was released, Tether announced a collaboration with Tron and TRM Labs to establish a 'financial crime department' to combat the illegal use of USDT.
Friends from Washington
Meanwhile, competitive pressure is rapidly increasing. The U.S. Securities and Exchange Commission has been working for years to crack down on crypto companies of all sizes, but now an elected president has appointed several digital asset advocates to key positions, including the head of the SEC. Howard Lutnick, CEO of Cantor Fitzgerald LP, leads an asset management company that directly helps manage about $85 billion in U.S. Treasury bonds held by Tether; he is the U.S. Secretary of Commerce chosen by Trump.
Donald Trump, known as 'the king of understanding', won the election in early November, sparking a frenzy in the cryptocurrency market, with Bitcoin prices breaking the monumental $100,000 barrier for the first time and many smaller, more speculative tokens experiencing dizzying rises. Investors have been flooding into the market, expecting that more lenient regulatory measures will be enacted in the U.S. once Trump officially takes office. Trump himself is fully embracing digital assets and has stated his goal to make the U.S. the 'cryptocurrency capital' and a 'Bitcoin superpower.'
In this context, the risk is that Europe seems likely to become a 'dead water' for cryptocurrencies. Although there are currently no reliable data on the overall cryptocurrency trading volume across the entire European continent, there are already signs indicating an unfavorable situation. For instance, according to PitchBook, venture capital investment in cryptocurrency startups in Europe is expected to fall to its lowest point in four years in 2024. In contrast, North America has shown clear signs of recovery since the Federal Reserve's interest rate hike cycle in 2022 has impacted cryptocurrencies.
However, there are also some encouraging signs. According to a report released by the European Central Bank on Thursday, since 2022, cryptocurrency holdings in the eurozone have more than doubled to 9%. However, the European Central Bank warned that this growth could be distorted due to updated methods since the 2022 survey, stating that the current adoption rate remains 'relatively low'.
Global cryptocurrency venture capital transactions—funding for cryptocurrency companies in Europe has fallen to its lowest level since 2020.
At least in the short term, removing Tether from various cryptocurrency trading platforms in Europe is likely to lead to a significant decline in liquidity for traders who have relied on Tether for years. Globally, the available 'trading pairs' of USDT far exceed those of the second-largest stablecoin, Circle's USDC.
'A large portion of crypto assets are paired with Tether's USDT,' said Pascal St-Jean, CEO of crypto asset management firm 3iQ Corp. 'Therefore, if investors need to switch from USDT trading pairs to other stablecoin trading pairs just to buy the same asset, this process incurs certain costs and unexpected trading disruptions.' 'USDT is the main stablecoin in the cryptocurrency market, and many crypto assets use USDT as a trading pair.'
According to Erald Ghoos, CEO for the European region, cryptocurrency traders at the exchange OKX have shifted to using fiat trading pairs instead of relying on other stablecoins, which is extremely detrimental to stablecoin liquidity. OKX delisted USDT in the EU as early as April. 'I was very surprised by this.' #比特币战略储备
