The new EU crypto regulations set to take effect at the end of the year are already reshaping the market for digital tokens, especially stablecoins like Tether’s USDT. Many crypto exchanges in the EU have delisted USDT to comply with the MiCA, which aims to improve oversight and prevent crimes like money laundering. However, some experts warn that these regulations may reduce market activity without fully achieving their intended goals, potentially making the EU less attractive to digital asset traders.
Crypto executives caution that the MiCA regulations could hamper market liquidity without effectively meeting their objectives. Usman Ahmad, CEO of Zodia Markets, points out that USDT is an essential stablecoin for crypto traders to transfer funds, move money across borders, and settle traditional assets. Concerns have arisen about the use of stablecoins in illegal activities, such as reports of Russian networks using USDT for illicit transactions. Tether has condemned these illegal uses and is committed to preventing such activities.
MiCA mandates that stablecoins listed on centralized exchanges must be issued by a company with an e-money license. While Circle has already obtained this license, Tether has not yet received it, raising the possibility of its delisting by December 30. Authorities need improved tools to track illegal transactions, as USDT has been widely used in illegal activities. Tether is working to combat financial crimes through a new partnership, but challenges remain in enforcing regulations effectively.
With the upcoming U.S. presidential election, there are expectations that the U.S. will adopt a more crypto-friendly regulatory approach, leading to a market rally. In contrast, Europe is experiencing declining crypto investments, with venture capital in crypto startups set to hit a four-year low, raising concerns about falling behind in the crypto market. However, some encouraging signs include a doubling of crypto ownership in the euro area to 9% since 2022.
Despite the growth in crypto ownership, the removal of Tether (USDT) from EU platforms is expected to significantly reduce liquidity due to its global trading pairs. Traders may face disruptions as they transition from USDT to other stablecoins or fiat pairs. Some exchanges have already seen traders shifting to fiat pairs instead of using alternative stablecoins. As the crypto market continues to evolve, effective regulation and oversight will be crucial to balancing innovation with investor protection and preventing illicit activities.
