Tether’s Market Value Sees Sharp Drop as MiCA Regulations Impact EU Trading
Tether’s market capitalization has suffered its largest weekly decline in over two years, falling by more than 1% this week. The drop, which follows the collapse of FTX in November 2022, has seen USDT’s value fall to $137.24 billion, down from its peak of $140.72 billion in mid-December. This decline is largely attributed to the recent enforcement of the European Union’s Markets in Crypto-Assets (MiCA) regulations, which came into full effect on December 30, 2023.
MiCA mandates that stablecoin issuers, such as Tether, must acquire a license to offer or trade asset-referenced tokens (ARTs) and e-money tokens (EMTs) within the EU. Since USDT is an EMT, pegged to the U.S. dollar, it is subject to these new rules. As a result, while traders in the EU can still hold USDT in non-custodial wallets, it is no longer available for trading on MiCA-compliant exchanges. This restriction has triggered concerns regarding its impact on Tether’s market cap.
However, analysts believe that Tether’s market dominance is unlikely to be severely affected. Karen Tang, head of APAC partnerships at Orderly Network, a decentralized liquidity provider, stated that the MiCA regulations would not significantly harm USDT’s global position. “The EU is not the largest crypto market. The bulk of trading volume occurs in Asia and the U.S.,” Tang noted. “The real impact will be on the EU’s ability to foster digital asset innovation, which has already been hampered by excessive regulation.”
Crypto analyst Bitblaze echoed these views, highlighting that Asia accounts for 80% of USDT’s trading volume. “Given that the EU accounts for a smaller share of Tether’s trading volume, the MiCA delistings are unlikely to disrupt USDT’s dominant market position,” Bitblaze commented.
In response to MiCA’s introduction, Tether has taken proactive steps to ensure compliance. The company has invested in MiCA-aligned firms like StablR and Quantoz Payments, demonstrating its commitment to regulatory adherence and ensuring it can continue to operate in the EU market.
Despite the challenges posed by the new regulations in Europe, Tether’s global influence remains intact. USDT continues to play a central role in the cryptocurrency market, underpinned by its wide adoption across Asia and the U.S.
