Source: Talking about Li and other things
Remember in an article earlier this year (January 3), we mentioned an EU (Market Regulation on Crypto Assets) (MiCA), as shown in the figure below.
According to the timeline, MiCA's regulatory rules for stablecoin issuers came into effect on June 30 and will be fully implemented on December 30. MiCA is the EU's first complete regulatory framework for the crypto industry, and it particularly sets clear requirements for the regulation of stablecoins.
In the context of increasingly stringent compliance requirements, it is foreseeable that competition in the European stablecoin market will intensify. According to some previous news, it seems that some crypto companies have also made corresponding preparations. For example, Tether, which has not obtained a license, is said to have invested in the Dutch company Quantoz and the European stablecoin provider StablR.
In addition, European countries seem to be continuing to promote regulatory steps for cryptocurrencies. For example, the UK's FCA (Financial Conduct Authority) has stated its hope to introduce a comprehensive regulatory framework for cryptocurrencies by 2026 (the holding of crypto assets in the UK has grown by 4% in the past two years, with about 7 million adults holding crypto assets among the country's 68 million population). The German parliament also passed the financial market digitalization law required for the comprehensive implementation of MiCA this month (December 21).
Returning to Tether, according to reports from Bloomberg, several crypto exchanges in the EU have delisted Tether's USDT to comply with MiCA regulations. Although Tether has made some preparations, it has not yet obtained the corresponding formal licenses. Meanwhile, Tether's main competitor, Circle, has obtained such licenses and is currently the world's first stablecoin issuer compliant with MiCA. They have now issued USDC and EURC locally to European customers, effective from July 1.
Therefore, some may ask, if EU exchanges completely delist USDT, will USDT collapse like UST did back then?
Next, let's briefly discuss this issue.
I remember last year (2023), we published a detailed article on the development history of Tether (USDT) on our public account, but that article is no longer available. Those interested in the history of Tether can search for it on Google.
Regarding the MiCA introduced by the EU, the purpose of regulation is to better grasp the liquidity of cryptocurrencies and prevent criminal activities like money laundering. We all know that cryptocurrencies like USDT are often used for such criminal activities. Moreover, for a long time, doubts about USDT have not ceased, including:
- Lack of transparency and questionable security. For example, it has never undergone a proper audit; although Tether released an 'audit report' in cooperation with BDO in 2021, it was not a formal audit.
- Centralization risks and potential legal risks
However, issues of transparency and security seem to have existed since the inception of USDT. These issues do not need to be overly concerning for ordinary retail investors. As we mentioned in a previous article: at least from our perspective, this field will still primarily revolve around USDT trading in the next 3-5 years.
However, we need to simultaneously pay attention to the fact that, compared to the long-standing issues of transparency and security, the most serious issue that stablecoins like USDT may face right now is liquidity loss. If USDT exits the EU market due to non-compliance with MiCA, liquidity loss will inevitably occur.
However, those who understand the development history of Tether should also know that they have faced many strikes or fines from relevant authorities in the past but still remain the largest stablecoin in the crypto field, with a market value of 138.57 billion USD. As shown in the figure below.
Although they seem to be facing a new round of strikes from the EU, many have panicked and exchanged all their USDT for USDC in recent days. However, I think this worry is somewhat unnecessary.
To put it bluntly, Tether's current scale and status have made it a 'too big to fail' company. I believe that a MiCA regulation from the EU cannot cause USDT to collapse. Consider how many big players, institutions, and primary exchanges have their funds (or reserves) tied up in this. If USDT were to collapse this month due to this EU regulation, it would mean the entire crypto industry might face collapse, a result that those big players certainly do not want to see.
On the other hand, as we have already mentioned, Tether is also trying to circumvent some regulations through investments. Therefore, in the short term, there is no need to panic. If you are still not at ease, you might consider splitting your stablecoin position into half USDT and half USDC.
In short, in the face of huge market and capital interests, some regional regulations may not have a fatal blow to USDT in the short term. As it stands, the only thing that can eliminate USDT is its gradual abandonment by liquidity, but this takes time. If this MiCA successfully forces USDT to exit the European market, it only adds a fast-forward button to that timeline (of course, we cannot rule out the possibility of USDT becoming fully compliant in the future).
From a longer-term perspective, comprehensive regulation of stablecoins is just a matter of time. For example, with Trump's possible return to power next year, the U.S. may also introduce some legislation (or legal framework) regarding cryptocurrencies. For USDT, 2025 may pose greater challenges, but for the stablecoin industry, 2025 may become a new glorious year, as only with a clear legal framework for stablecoins can large-scale institutional (such as JPMorgan and other large institutions and traditional financial institutions), corporate, and consumer attention and participation be introduced, which will have a huge impact.
The development of the stablecoin industry is not limited to the crypto field; it may also represent the continuation of the dollar's status in the future. Once stablecoins are finally pegged to fiat currencies (mainly referring to the dollar), the development of stablecoins will also mean an increased global demand for the dollar, which will be a huge game.
