Tether Market Cap Falls in EU Under MiCA—Investors Shift Towards Approved Stablecoins
MiCA is reshaping the European crypto market. The new EU regulation is impacting major stablecoins issuers like Tether. l Source: Ralph Orlowski/Getty Images
- The Markets in Crypto-Assets (MiCA) framework is now shaping the regulatory landscape in Europe.
- Investors are moving towards regulated stablecoins, which have seen notable gains.
- Tether’s stablecoin is not yet banned in the EU, but it must align with the new regulations by the end of this year.
The crypto industry is facing a pivotal moment as the European Union’s Markets in Crypto-Assets (MiCA) regulation comes into effect. This groundbreaking legislation is reshaping the continent’s crypto ecosystem, particularly for stablecoins. As regulators tighten their grip, industry giants and investors are navigating uncharted waters.
Also, big players like Tether (USDt) and Circle (USDC) must adhere to the new regulation. While the company behind USDC obtained a license in France and can trade its euro-pegged stablecoin, Tether is facing some issues. However, it is still in time to meet the E.U. law requirements.
What’s MICA?
Binance and other crypto exchanges are adapting to the new regulatory landscape in Europe under the MiCA framework . This includes measures such as restricting trading of non-compliant stablecoins.
It’s crucial to understand that MiCA doesn’t introduce entirely new rules for fiat-backed stablecoins but reinforces existing regulations under the Electronic Money Directive (EMD). This means that such stablecoins have been subject to specific licensing requirements since 2000.
To comply with MiCA, stablecoin issuers, including major players, like Tether, must obtain the necessary licenses as Electronic Money Institutions (EMIs) or meet equivalent requirements. This regulatory clarity aims to protect investors and ensure the stability of the crypto market.
While some stablecoins might currently be operating outside the legal framework, MiCA’s implementation will bring about a more regulated environment for fiat-backed stablecoins in Europe.
Investors Shift Towards Approved Stablecoins
According to YouHodler CEO, Ilya Volkov, E.U. stablecoin users should convert non-compliant stablecoins to regulated ones to ensure stability without affecting asset value.
He advised against moving stablecoins to offshore platforms, emphasizing that staying on MiCA-compliant platforms protects users from legal and financial risks, including potential asset freezes. Volkov added that converting unregulated stablecoins to regulated ones, such as USDT to USDC, will not result in a loss of value.
Currently, only a few stablecoin issuers hold a license, including Iceland’s Monerium (EURe) and the U.S. exchange Gemini (GUSD). Also, Circle’s USDC can still be traded in the European Union as the company obtained an EMI license in France.
Under the new regulations, investors have shifted towards approved stablecoins , moving away from Tether’s EURT. Over the past month, EURT has dropped 6.7% in value, with its market capitalization falling to $31.1 million.
In contrast, approved stablecoins like Circle’s EUROC have surged, gaining 12% in the last 30 days to reach a market cap of $33.0 million. Similarly, VNX Euro’s VEUR increased by 6.3% to $2.7 million, ARYZE eEUR’s eEUR jumped 23%, and EURO3 recorded a notable gain of over 10%.
Despite this, Circle’s recent approval has overshadowed other approved stablecoins. Monerium’s EURe saw a 6.4% decline, bringing its market cap to $14.2 million, while Celo Euro’s CEUR dropped 11% to $5.6 million.
The most significant decline was observed in Quantoz EURD’s EURD, which plummeted 49% to a market cap of $1.1 million.
Will Tether Adhere to New Regulation?
Major cryptocurrency exchanges, including Uphold, Bitstamp, Binance, Kraken, and OKX, are taking steps to comply with the new E.U. crypto regulations. This has led to the delisting of certain stablecoins or restrictions for E.U.-based users. Tether, the largest stablecoin by market capitalization, is among those affected.
To continue operating within the E.U., Tether must register as a regulated entity. However, the company has expressed concerns about the complexities and potential risks imposed by MiCA.
Tether CEO, Paolo Ardoino, has raised specific issues about the law’s requirements. He emphasized the need for further clarification to avoid hindering innovation and stability in the stablecoin market.
Beyond licensing, MiCA also imposes strict limits on stablecoin issuance. Under the new rules, companies cannot issue more stablecoins if their daily transaction volume exceeds one million, or their total daily trading volume surpasses €200 million.
It’s important to highlight that Tether’s EURT hasn’t yet been banned in the E.U. In fact, the final provisions of MiCA affecting crypto asset service providers will come into force on Dec. 30, 2024. However, crypto companies will have an extended period until July 2026 to fully align their operations with the new regulations.
Circle’s USDT Can Still Be Traded in EU
Circle has secured a crucial Electronic Money Institution license in France. This makes it the first major stablecoin issuer to fully comply with the E.U.’s stringent crypto regulations. The license allows Circle to issue its USD Coin (USDC) and Euro Coin (EURC) stablecoins within the E.U.
With this achievement, Circle can now offer its stablecoin services, including minting and redeeming, across all E.U. member states. The company has also launched Circle Mint in France, a platform enabling businesses to create and manage their stablecoin holdings.
Jeremy Allaire, co-founder and CEO of Circle, said , “Our adherence to MiCA, which represents one of the most comprehensive crypto regulatory regimes in the world, is a huge milestone in bringing digital currency into mainstream scale and acceptance.”
Launched in 2018 by Circle and Coinbase, USDC has grown to become the second-largest stablecoin globally , with a market cap of $31.3 billion. Tether’s USDT remains the dominant player with a market capitalization of $105.4 billion.
