Tether (USDT), the largest dollar-pegged stablecoin in the world, has suffered a setback. Over the past week, its market value dropped by more than 1%, marking the biggest decline in two years. This sharp dip has raised concerns about the stability of the broader crypto market, which has been fueled by regulatory changes sweeping across Europe.
Tether USDT Market Cap Takes a Hit: A Historic Drop
USDT’s market cap fell to $137.24 billion in mid-December after reaching a record high of $140.72 billion. This drop is similar to the aftermath of the FTX exchange crash in November 2022. The decline is tied to major European exchanges and Coinbase removing USDT from their platforms.
These crypto firms cited compliance issues with the European Union’s new Markets in Crypto-Assets (MiCA) regulations. These regulations came into full effect on December 30. They require stablecoin issuers to have a MiCA license to offer or trade tokens in the EU.
The regulations define two main types of tokens: Asset-Referenced Tokens (ARTs) and E-Money Tokens (EMTs). USDT, pegged to the U.S. dollar, falls under the EMT category. This means the stablecoin must comply with these new rules to continue trading on centralized exchanges in the EU.
EU Delistings Stir Concern, But Is It All Doom and Gloom?
The delisting of USDT from MiCA-compliant exchanges in the EU has sparked fears of a wider downturn in the crypto market. This could trigger a significant ripple effect, reducing liquidity and access to the stablecoin for European traders.
However, some analysts argue these concerns might be exaggerated. Karen Tang, head of APAC partnerships at Orderly Network, pointed out that the EU is not the largest crypto market. She stated that most crypto trading volume happens in Asia and the U.S., where USDT remains widely accessible.
According to Tang, this regulation may stifle digital asset innovation in the EU but is unlikely to affect USDT’s dominance globally. Tang even joked that she would short the EU over its excessive regulations if she could.
Crypto analyst Bitblaze echoed Tang’s view, noting that Asia accounts for 80% of USDT’s trading volume. With a market cap of $138.5 billion and a daily trading volume of $44 billion, USDT remains the largest stablecoin.
Tether’s Response: Staying Ahead of Regulatory Hurdles
Tether has tried aligning with regulatory requirements by investing in MiCA-compliant firms like StablR and Quantoz Payments. This proactive approach helps ensure stablecoin stays on track even as global regulations evolve.
While MiCA regulations may challenge USDT’s position in the EU, the broader outlook remains positive. USDT’s dominance in markets like Asia and the U.S. continues. This suggests that the stablecoin will remain a key player in the global crypto landscape.
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