“Tether’s USDT Experiences a $1.4 Billion Drop Due to the Implementation of MiCA”

The widely used stablecoin from Tether, USDT, has seen a notable decrease of about 1.2% in its market capitalization this week, the largest since the FTX collapse in 2022. This decrease comes at a tim...

January 3rd, 2025
Max Latupeirissa

Tether’s widely used stablecoin, USDT, saw a notable drop of about 1.2% in its market capitalization this week, the largest since the collapse of FTX in 2022. This drop comes at a time when the new EU regulation for digital assets, known as MiCA, fully came into effect on December 30.

Market Reaction and Speculation:

The market capitalization of USDT dropped from $140 billion to $137 billion, leading to speculation about the future of Tether and possible volatility of USDT. There was concern that Tether might leave the European Union due to the new regulation.

Despite the concerns, various experts and analysts emphasize the resilience of USDT outside Europe. Karen Tang, head of APAC partnerships at Orderly Network, notes that the Asian and American markets maintain the dominance of USDT. Tang adds that the MiCA regulation could rather hinder the EU itself through a “complicated over-regulation” that slows down the growth of digital assets.

Tether’s Approach to MiCA:

Speculation about Tether’s position in the EU increased after Coinbase and other EU-based exchanges removed USDT from their platform due to compliance issues with MiCA. Although the rules for stablecoins came into effect in July, the full MiCA framework only became applicable at the end of 2024.

Licensing Requirements: MiCA requires that stablecoin operators have licenses for e-money tokens and asset-based tokens. Circle’s USDC is currently the only major stablecoin that has obtained a MiCA license.
Tether’s Preparation: Tether has invested in EU companies such as StablR and Quantoz in preparation for compliance. CEO Paolo Ardoino has confirmed that the company does not plan to leave the EU market. Although USDT is currently not tradable on MiCA-compliant exchanges, traders can still store the stablecoin in non-custodial wallets as a temporary solution.

These developments show how the regulation of stablecoins can influence market dynamics in Europe, while Tether is working on finding a way to comply with the new rules.