The total supply of USDT (Tether) is distributed globally, and it’s difficult to determine exactly how much is held within the European Union (EU) specifically. However, Tether is widely used across the world for trading, remittances, and as a stablecoin hedge in both centralized and decentralized finance (DeFi) ecosystems. As of December 2024, the total circulating supply of USDT is over $139.01 billion, making it the largest stablecoin by market capitalization.
Could the EU Ban USDT and Cause a Depeg?
The EU has been actively working on cryptocurrency regulations, most notably the Markets in Crypto-Assets (MiCA) framework, which aims to establish clear rules for stablecoins and other digital assets. While MiCA does not outright ban USDT, it imposes strict requirements on stablecoin issuers, such as:
Reserve Requirements: Stablecoin issuers must hold sufficient reserves to back their tokens.
Transparency: Issuers must provide regular audits and disclosures.
Licensing: Stablecoin issuers must be authorized to operate within the EU.
If Tether fails to comply with these regulations, the EU could restrict or ban the use of USDT within its jurisdiction. However, whether this would cause a depeg (loss of the 1:1 USD peg) depends on several factors:
Global Demand: USDT is used globally, and a ban in the EU might not significantly impact its overall demand if other regions continue to use it.
Market Confidence: If the ban leads to widespread fear or loss of confidence in Tether’s ability to maintain its peg, it could trigger a sell-off and depeg.
Reserve Backing: Tether’s ability to maintain its peg depends on its reserves. If it holds sufficient reserves (as it claims), a regional ban might not directly cause a depeg.
Liquidity and Redemptions: If users rush to redeem USDT for USD, Tether’s liquidity and reserve management will be tested.
Historical Context
Tether has faced scrutiny and legal challenges in the past, including allegations of insufficient reserves and regulatory fines. Despite this, it has maintained its peg, largely due to its dominant position in the crypto market and its role as a liquidity provider for exchanges.
Conclusion
While an EU ban on USDT could create short-term volatility and reduce its usage in Europe, it is unlikely to single-handedly cause a depeg unless it triggers a broader loss of confidence or liquidity crisis. The global nature of USDT’s usage and Tether’s reserve management would play a critical role in maintaining its stability.