Can USDT Survive EU Regulations?

On October 4, users of Coinbase, one of the world’s largest crypto exchanges, received notifications about potential restrictions on stablecoins that fail to comply with the European Union’s Markets in Crypto-Assets (MiCA) regulations. At the center of attention is Tether, the largest stablecoin by market capitalization, which risks losing access to a significant portion of the European market.

Of course, it’s worth mentioning that Coinbase, alongside Circle, co-owns USDC, Tether’s primary competitor.

What Do We Know So Far?

Despite publicly supporting the EU’s regulatory initiatives, Tether has expressed concerns over certain MiCA provisions.

“Some aspects of MiCA make the operation of EU-licensed stablecoins more complex and potentially introduce new risks to both local banking infrastructure and stablecoins themselves,” Tether CEO Paolo Ardoino stated in an interview with Cointelegraph.

To address these challenges, Tether is working on a technological solution tailored to the European market.

“We plan to introduce this tool in due course,” Ardoino added. However, no details about the solution have been disclosed yet. The deadline for compliance is December 30, 2024.

On November 24, Tether announced its decision to discontinue support for EUR₮. The last request to purchase EUR₮ was processed in 2022, and new issuance requests are no longer being accepted. Tether clients holding EUR₮ on any blockchain must redeem their assets by November 27, 2025.

What’s Wrong With MiCA?

Tether’s primary objection lies in reserve management requirements. The mandate to hold 60% of reserves in bank deposits contradicts the company’s diversified risk management model. Ardoino stated that the requirement to keep a significant portion of reserves in banks creates risks for the stability of both the banking infrastructure and stablecoins.

Considering USDT’s $118 billion market cap and the deposit insurance cap of €100,000 in the EU, the risks appear substantial. For Tether, this also means ceding a significant degree of independence in financial decision-making, which clashes with the company’s philosophy.

Among Ardoino's other arguments is the 2023 bankruptcy of Silicon Valley Bank, which held a significant portion of USD Coin reserves. As a result, USDC temporarily lost its peg to the dollar.

Will This Destabilize the Market?

Even if EU exchanges restrict access to USDT, the global market is unlikely to feel a significant impact:

• It’s a service restriction, not a delisting. Exchanges like Coinbase may limit USDT access for users in the European Economic Area (EEA), but the stablecoin will remain available in other regions. However, for many crypto companies aiming to remain in the European market, it is crucial not only to comply with regulations but also to adapt their business strategies. Specialized agencies like Generis, with experience in supporting crypto projects during the transition to new regulatory frameworks, play a key role in this process.
  

• Europe isn’t the largest crypto market. Most crypto trading volume occurs in Asia and America.

  
  

At the same time, Tether continues to strengthen its position in other markets. Recently, the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority officially approved USDT as an accepted virtual asset (AVA). This decision enables licensed financial service providers within ADGM to offer USDT-related services and integrate them into financial ecosystems.

Even if exchanges like Coinbase restrict access to USDT within the EEA, this is unlikely to affect its market capitalization significantly. The majority of USDT trading volume occurs outside the EU, and as long as Asian and American markets remain active, Tether is expected to maintain its dominance.