Source: Talking Li Talking Outside
I remember in an article at the beginning of this year (January 3), we mentioned the EU's (Regulation on Markets in Crypto-Assets) (MiCA), as shown in the figure below.
Looking at the timeline, the regulatory rules for stablecoin issuers under MiCA took 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, particularly with clear requirements for the regulation of stablecoins.
Against the backdrop of increasingly stringent compliance requirements, it is foreseeable that the competition in the European stablecoin market will inevitably intensify. According to previous reports, it seems that some crypto companies have made corresponding preparations. For instance, Tether, which has not obtained a license, is reportedly investing in the Dutch company Quantoz and the European stablecoin provider StablR.
In addition, countries in Europe seem to be continuously advancing regulatory measures for cryptocurrencies. For example, the UK's FCA (Financial Conduct Authority) has expressed hope to launch a comprehensive regulatory framework for cryptocurrencies by 2026 (the holding of crypto assets in the UK has increased by 4% over the past two years, with about 7 million adults owning crypto assets among the country's 68 million population). The German parliament also passed the (Digitalization of Financial Markets Act) necessary for the full implementation of MiCA this month (December 21).
Returning to Tether, according to reports from Bloomberg, in order to comply with MiCA regulations, multiple crypto exchanges in the EU have delisted Tether's USDT. As of now, although Tether has made some preparations, it has not 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 locally issued USDC and EURC to European clients, effective from July 1.
Therefore, some partners may ask, if EU exchanges completely delist USDT, will USDT collapse like UST did back then?
Next, let's briefly talk about this issue.
I remember last year (2023), we published a special article on our public account detailing the development history of Tether (USDT), but that article is no longer accessible. Partners interested in Tether's history can search it on Google.
Regarding the MiCA introduced by the EU, the aim of regulation is to better grasp the liquidity of cryptocurrencies and prevent money laundering and other criminal activities. We all know that cryptocurrencies like USDT are often used in such criminal activities. Moreover, for a long time, the doubts about USDT have never ceased, including:
- Insufficient transparency and questionable security. For example, it has never undergone a proper audit. Although Tether collaborated with BDO to release an 'audit report' in 2021, it was not an official audit.
- Centralization risks and potential legal risks
However, issues of transparency and security have seemingly existed since the birth of USDT. These problems are not something ordinary retail investors need to focus on too much, just as we mentioned in a previous article: at least from our perspective, the trading in this field will still mainly revolve around USDT in the next 3-5 years.
But the point we need to pay attention to here is that, compared to the ongoing issues of transparency and security, for stablecoins like USDT, the potential liquidity loss is currently the most serious problem we may face. If USDT exits the EU market due to non-compliance with MiCA, a liquidity loss will inevitably occur.
But those who understand Tether's development history should also know that they have already experienced many crackdowns or fines from relevant institutions in the past, and they remain the largest stablecoin in the crypto space, with a market cap of $138.57 billion. As shown in the figure below.
Although they seem to be facing a new round of crackdown from the EU, and many partners have been panic exchanging all their USDT for USDC in recent days, I believe this concern is somewhat excessive.
Or, to put it bluntly, Tether's current scale and status have made it a 'too big to fail' company. I believe that a regulation from the EU's MiCA would not lead to the collapse of USDT. Think about how many big players, institutions, and primary exchanges have funds (or reserves) involved. If USDT were to collapse this month solely because of this EU regulation, it would mean that the entire crypto industry might face a collapse, which those big players certainly do not want to see.
On the other hand, as mentioned above, Tether is also attempting to bypass some regulations through investments. Therefore, in the short term, we need not panic. If you are still worried, you might consider splitting your stablecoin position into half USDT and half USDC.
In summary, in the face of significant interests from the market and capital, sometimes, some regional regulations may not have a fatal impact on USDT in the short term. Currently, 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 would merely accelerate this process (of course, we cannot rule out the possibility that USDT may become fully compliant in the future).
From a longer-term perspective, comprehensive regulation of stablecoins is merely a matter of time. For example, with Trump's return to power next year, the U.S. may also introduce some legislation (or legal framework) concerning cryptocurrencies. For USDT, 2025 may pose greater challenges, but for the stablecoin industry, 2025 might become a new glorious year. This is because only with a clear legal framework for stablecoins can there be a large-scale influx of attention and participation from institutions (such as JPMorgan and other large institutions) and consumers, which will have a tremendous impact.
The development of the stablecoin industry is not limited to the crypto domain; it may represent the continuation of the dollar's status in the future. Once stablecoins are ultimately pegged to fiat currencies (primarily referring to the dollar), the development of stablecoins will also mean an increase in global demand for the dollar, which will be a huge game.
