USDT Safe for Now, But Stablecoins Looking for post-MiCA Relevancy

Key Takeaways

Cryptocurrency exchange Kraken reassured users  that it has no plans to delist the Tether stablecoin (USDT) in Europe and will continue to comply with all legal requirements. The platform’s announcement came shortly after reports that it would take USDT off the exchange.

For now, stablecoins appear to be safe since the rules under MiCA applicable to them will come into force on June 30. However, the regulations for cryptocurrency service providers will take effect six months later on December 30.

Kraken Fights to Keep USDT in Europe Amid MiCA Uncertainty

Kraken’s global head of asset growth and management, Mark Greenberg, addressed  a recent report about the exchange “actively reviewing” and potentially delisting USDT from the European market.

Greenberg said  the firm was exploring all options to continue offering USDT under the upcoming regulatory regime.

The European Union’s Markets in Crypto Assets regulation (MiCA) will take effect later this year, focusing on stablecoins.

The firm will continue to follow all legal requirements, even those it disagrees with, Greenberg said. He pointed that the rules were not finalized yet. Meanwhile, he claimed. Kraken was doing “everything possible”to make sure European customers can still buy, sell, and trade stablecoins.

A May 17 article from Bloomberg reported  that Kraken was actively reviewing its plans to comply with the European Union’s upcoming Markets in Crypto Assets Regulation (MiCA) framework.

Marcus Hughes, Kraken’s global head of regulatory strategy, said :

“We’re absolutely planning for all eventualities, including situations where it’s just not tenable to list specific tokens such as USDT. It’s something that we’re actively reviewing, and as the position becomes clearer, we can take firm decisions on that.”

Tether Responds to Kraken’s Compliance Plans Amid MiCA Framework Implementation

In response to Kraken’s remarks, Tether stated  that it expects exchanges to focus on Euro liquidity for European customers while keeping USDT as an on-ramp and off-ramp solution.

Meanwhile, Tether CEO, Paolo Ardoino  expressed concerns about certain aspects of MiCA’s requirements. He also confirmed the company’s was in talks with European regulators. Ardoino previously told The Big Whale  that Tether has no plans to be regulated under MiCA rules in the medium term.

Kraken Battles SEC Lawsuit Over Securities Trading Allegations

In November 2023, the United States Securities and Exchange Commission (SEC) initiated a lawsuit against Kraken, alleging it had been operating an unregistered securities trading platform. This suit came months after Kraken settled charges  related to its former staking service.

In February, Kraken filed to dismiss the lawsuit , saying the case relied solely on a registration-based argument regarding its operation as an unlicensed securities entity. It also argued that cryptocurrencies listed as SEC-compliant should be treated like commodities rather than securities.

Kraken has now ueged the court to dismiss the claims to avoid a “significant reordering” of US financial regulations. The SEC filed an opposition  to Kraken’s motion to dismiss. The regulator that its enforcement action was within the rules, saying it enforces registration requirements for securities traders.

Additionally, there has been ongoing discussion about the safety of stablecoins, specifically Tether’s USDT and USD Coin (USDC). As of April, USDT’s market capitalization of $104 billion is more than triple USDC’s $32 billion. Part of this difference can be attributed to the network effect. This is because USDT launched in 2014, while USDC came out in 2018. This dominance is evident in daily trading volume, where USDT’s trading volume is 7.5 times higher than that of USDC.

Competitive Landscape Amid Regulatory Changes in Europe

One of Kraken’s biggest competitors, OKX, delisted USDT in Europe in March. Binance announced plans to make a similar move last September, citing the need to comply with MiCA, but has not yet followed through.

In April, Kraken ended support for the Monero (XMR) privacy token for its customers in Belgium and Ireland.

Despite these regulatory challenges, Kraken continues to expand its services in Europe. The exchange recently secured a virtual asset service provider registration in Spain and the Netherlands. It also got an electronic money institution license in Ireland.

MiCA and the Reality of Fiat-Backed Stablecoins in Europe

Despite what many people think, MiCA does not introduce new regulations for fiat-backed stablecoins. Instead, it confirms that issuers must be regulated as electronic money institutions (EMIs). Many stablecoins currently offered in Europe are already illegal because they are not authorized and regulated as electronic money under existing EU law.

MiCA says that, from July, issuers of fiat stablecoins must comply with the electronic money directive (EMD). Only EMIs and credit institutions can legally issue fiat stablecoins in the European Economic Area. Currently, companies like Monerium, Membrane, and Quantoz Payments issue on-chain fiat stablecoins under the EMD. However, others, including Circle , are in the process of obtaining EMI licenses.

Despite these regulations, some stablecoin issuers disregard EU rules, offering products without proper authorization. This “move fast and break things” approach captures market share but flouts European regulations. The effectiveness of EU regulatory oversight and enforcement is in question, as non-compliant issuers operating illegally may later obtain licenses. This lack of enforcement places compliant European companies at a disadvantage and risks consumer safety, creating unfair competition with U.S. issuers who take a more cavalier approach.

About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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